Updated October 16, 2026. Quick answer: Not as a rule. The Department of Revenue’s rule says “Alabama income tax is not required to be withheld” from a retirement or pension plan payment, and that “voluntary withholding of Alabama income tax is permissible”.
Alabama pension withholding at a glance
| Item | What the documents say |
|---|---|
| Is state withholding required on regular pension payments? | No. Alabama does not require it on a pension payment; a payer may withhold if it chooses |
| Default rate if you give the payer no form | None stated; a payer that withholds voluntarily sets the terms |
| Lump sum or one-time payment | No separate lump-sum rule stated; the same voluntary rule covers it |
| Form to start, change or stop it | No payee certificate named in the documents read |
| Changed for 2026? | No change stated |
What the Alabama documents say
Alabama Administrative Code 810-3-26-.02 covers voluntary withholding from nonwage payments, which include distributions from a retirement or pension plan. It says Alabama income tax is not required to be withheld from those payments, and that a payer who does withhold must follow the procedures in the rule, which end with reconciliation on Form A-3.
The rule is what the Department publishes for the payer. It does not give a payee a form to start or stop withholding, so the practical step is to ask the plan administrator what it offers.
What a mover should know
This page is about Alabama as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it, state tax withholding on IRA and 401(k) withdrawals in Alabama covers the account side, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- The rule found was last amended in 2016. It names no payee certificate, no default rate and no lump-sum treatment, so a retiree who wants Alabama tax withheld has to ask the payer how.
Common mistakes
- Assuming the payer is withholding for the state because it withholds for the IRS: Alabama does not require the payer to withhold state tax from a pension, so ask the payer whether it withholds voluntarily and how.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: state tax withholding on IRA and 401(k) withdrawals in Alabama, Alabama retirement taxes, whether Alabama taxes pensions, state withholding on retirement withdrawals, and retirement withholding calculator.
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Answer againSources
- Alabama Administrative Code Chapter 810-3-26 Information From Source of Income: https://admincode.legislature.state.al.us/api/chapter/810-3-26
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.