Active-duty pay
Taxed
Active-duty pay generally taxable; combat zone pay is federally and state-exempt.
State Guide · AL
Alabama — Military Tax Treatment
Alabama exempts military retirement but taxes active-duty and Guard drill pay. If you're a Guardsman, the big tax break comes when you retire and start drawing at 60.
Tax treatment at a glance
Guard & Reserve drill pay
Taxed
Guard and Reserve drill pay is taxable Alabama income. SCRA protections apply during federal activation (Title 10 orders) but not routine drill.
Military retirement pay
Fully Exempt
Military retirement pay fully exempt from Alabama income tax.
The numbers · verified for tax year 2025
Top marginal rate
5%
Retirement-pay exemption
Full
Military retirement pay and military survivor benefits are 100% exempt from Alabama income tax under Ala. Code § 40-18-20 — no cap, no age requirement.
Standard deduction
Alabama uses an income-based standard deduction — up to roughly $3,000 single / $8,500 MFJ at low AGI, phasing down as income rises. Active-duty pay of residents is taxable.
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — Alabama included.
Survivor Benefit Plan (SBP)
Follows retirement
Alabama exempts military retirement — SBP annuities are generally exempt under the same provision.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in Alabama, Alabama cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to Alabama can keep Texas as their tax domicile and avoid Alabama state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether Alabama exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01Guard members: withhold AL income tax on drill pay or make quarterly estimated payments
- 02Retirement exemption: subtract on Form 40 Schedule S — not automatic based on payer withholding
- 03Combat zone pay is federally excluded — no AL tax either
Veteran-specific tax benefits
Property tax exemption for 100% P&T disabled vets.
Official authority
https://revenue.alabama.gov/ ↗State tax law changes annually. Verify current rules with the Alabama Department of Revenue before making any tax decision.
Alabama military tax — common questions
Does Alabama tax military retirement pay in 2026?
Alabama fully exempts military retirement pay. Military retirement pay fully exempt from Alabama income tax.
Does Alabama tax active-duty military pay?
Alabama taxes active-duty military pay for state residents. Active-duty pay generally taxable; combat zone pay is federally and state-exempt. Under the SCRA, Alabama can only tax the military pay of service members who are legally domiciled in Alabama — not those merely stationed there.
Does Alabama tax National Guard and Reserve drill pay?
Alabama taxes Guard and Reserve drill pay. Guard and Reserve drill pay is taxable Alabama income. SCRA protections apply during federal activation (Title 10 orders) but not routine drill.
Is VA disability compensation taxed in Alabama?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including Alabama — taxes it as income.
If I'm stationed in Alabama but claim another state, can Alabama tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, Alabama cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides