Alabama paychecks in 2026: what changed
Alabama's withholding formula kept its rates and deductions for 2026. Here is what applies.
The changes
- New federal withholding tables. The IRS updated Publication 15-T for 2026, including changes from the 2025 tax law. The standard deduction is $16,100 single, $32,200 married filing jointly, and $24,150 head of household.
- Social Security wage base: $184,500 (up from $176,100). If you earn more, Social Security stops later in the year.
- Tips and overtime deductions for 2025–2028 — see below.
- Rates: 2%, 4% and 5%, with federal income tax withheld subtracted first.
- New overtime deduction: up to $1,000 of overtime premium pay can be deducted on your 2026 Alabama return; withholding is unchanged.
- Minimum wage: still $7.25, the federal rate, because Alabama has no minimum wage law of its own.
Tips and overtime in 2026
New federal deductions apply for 2025 through 2028: up to $25,000 for qualified tips, and up to $12,500 ($25,000 for joint filers) for the extra "half" of time-and-a-half overtime. Both phase out above $150,000 of income ($300,000 joint).
These are deductions on your tax return. Your employer still takes Social Security and Medicare out of tips and overtime, and still withholds income tax unless you tell it otherwise. If you expect to claim them, you can put the expected amount in Step 4(b) of your W-4 (and in the Step 4(b) box above) so less income tax is withheld during the year.
Work out your 2026 Alabama paycheck →
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Sources
- IRS Publication 15-T (2026), Federal Income Tax Withholding Methods — Worksheet 1A and the annual percentage-method tables
- IRS Publication 15 (2026), Employer's Tax Guide — Social Security and Medicare rates
- Social Security Administration — 2026 wage base of $184,500
- IRS — tips and overtime deductions
- Alabama Department of Revenue — Withholding Tax Tables and Instructions for Employers and Withholding Agents (revised January 2026) — formula steps 1–6; standard deduction phase-down; $1,500/$3,000 personal exemption; $1,000/$500/$300 per dependent; 2%/4%/5% rates; federal withholding deducted; worked example (M-2, $850 weekly → $29.59); no A-4 → zero exemptions
- Alabama Department of Revenue — Form A-4, Employee's Withholding Exemption Certificate (rev. 4/2025) — exemption lines 0, S, MS, M, H; dependents other than spouse
- Alabama Department of Revenue — Withholding tax FAQs — Section 125, 401(k) and 403(b) exclusions recognized
- Alabama Department of Revenue — Overtime Premium Deduction (Act 2026-604) — deduction on the return for tax years 2026–2028, up to $1,000; W-2 wages and withholding unchanged
- Alabama Department of Revenue — Unemployment compensation tax — tax is due by an employer on the first $8,000 paid to each employee
- U.S. Treasury, Treasury Financial Manual — Appendix 2: list of cities and counties, types of tax — Alabama localities with occupational taxes, including the City of Birmingham
- City of Birmingham — Finance Department (Tax and License Administration) — collects occupational license taxes
- U.S. Department of Labor — State minimum wage laws — Alabama: no state minimum wage law; the federal $7.25 applies
- U.S. Department of Labor — Minimum wages for tipped employees — Alabama: federal $2.13 cash wage, more than $30 a month in tips
- Alabama Department of Labor — Wage and Hour information — no state wage and hour laws; federal rules and the U.S. Wage and Hour Division
- U.S. Department of Labor — State payday requirements — Alabama: no regulations or not specified
- U.S. Department of Labor — Last paycheck — federal law does not require immediate final pay
- IRS Publication 15-T (2026) — Worksheet 1A — used to estimate federal withholding if the engine does not pass it