Updated October 4, 2026. Quick answer: Yes. Alabama’s Department of Revenue prints one graduated schedule, 2% to 5%, with no separate rate for gains, and its instructions for estates and trusts say “Under current Alabama law, the entire gain is taxable”. Federal income tax paid is deductible.
Selling your home? How the state taxes the profit, from its own tax documents: Does Alabama tax the profit from selling your home?.
The same question for dividends and interest: does Alabama tax dividends and interest.
How Alabama treats capital gains
| Item | What the documents say |
|---|---|
| Treatment | Taxed as ordinary income; the documents read print no separate rate or exclusion for gains |
| Rates, single filer | 2% on the first $500 of taxable income, 4% on the next $2,500 and 5% on all over $3,000 (Department page, undated) |
| Rates, married filing jointly | 2% on the first $1,000, 4% on the next $5,000 and 5% on all over $6,000 |
| Federal tax deduction | “Federal income tax may be deducted for the taxable year” |
A $50,000 long-term gain
A single filer already over $3,000 of taxable income pays 5% on the whole gain: $50,000 x 5% = $2,500, before the federal income tax deduction.
What changes in 2026
The Department’s rate page is undated and prints no 2026 schedule.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on gains in Topic no. 409, Capital Gains and Losses and Publication 550, Investment Income and Expenses.
Related: whether Alabama taxes pensions, how Alabama taxes retirement income, the capital gains tax by state table, and the federal capital gains tax calculator.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Compare vetted advisors for investment gains
If your portfolio is $250,000 or more, this connects you (free, with no obligation to hire anyone) with 2 to 3 vetted advisors.
Before you start, what actually happens. The matching service is run by WiserAdvisor, an independent advisor-matching company. It opens on their site, asks for your ZIP code and a few questions, and matches you with 2 to 3 vetted advisors. It is free to you.
WiserAdvisor states the service is built for portfolios of $250,000 and above. By submitting, you consent to emails, phone calls and text messages from WiserAdvisor and up to three advisors, so expect to be contacted. Clear Money Guide may earn a referral payment for a qualifying completed form, whether or not you ever hire anyone.
Opens on WiserAdvisor’s site in a new tab.
See how an advisor plans your sales
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment through this service, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- Individual Income Tax: https://www.revenue.alabama.gov/tax-types/individual-income-tax/
- 2024 Form 41 fiduciary income tax instructions: https://www.revenue.alabama.gov/wp-content/uploads/2025/01/24f41instr.pdf
- Does Alabama provide for a federal income tax deduction?: https://www.revenue.alabama.gov/faqs/does-alabama-provide-for-a-federal-income-tax-deduction/
Sources: the primary documents linked above, read on October 4, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.