Alabama residency for tax purposes is determined by an individual’s domicile, which is defined as the place where a person has their permanent home and to which they intend to return. Domicile may be established by birth, choice, or operation of law, and each person has only one domicile at a time. A change in domicile requires both the establishment of a new domicile and the abandonment of the old one. The burden of proof for establishing a change in domicile rests with the taxpayer, even if they own no property, earn no income, or have no physical presence in Alabama.
Key Residency Rules
- Employment in a Foreign Country: If an Alabama resident accepts employment in a foreign country with the intent to return to the United States, they remain an Alabama resident for tax purposes. All income earned, regardless of location, is subject to Alabama income tax.
- Military Personnel: Military personnel whose legal residence is Alabama are subject to Alabama income tax on all income, regardless of where it is earned, unless specifically exempted by Alabama law.
- Military Spouses: Under the “Military Spouses Residency Relief Act” (Public Law 111-97), income earned by a spouse of a service member is not considered income from within a U.S. tax jurisdiction if the spouse is not a resident of that jurisdiction solely due to being with the service member under military orders.
Part-Year Residents and Deductions
- Part-year residents of Alabama should only report income earned while a resident of Alabama. Itemized deductions must be prorated to reflect only those expenses incurred while a resident of Alabama. Federal Tax Liability must be prorated by applying a percentage of Alabama adjusted gross income to Federal adjusted gross income in order to calculate the amount deductible on line 12 of Form 40. Part-year residents are allowed to deduct the full standard deduction, personal, and de pendent exemptions.
- Taxpayers may choose to itemize deductions (by checking box a on line 12) or claim the standard deduction (by checking box b on line 12), using the standard deduction chart on page 9 of Form 40
Source:
Form 40 - Alabama Individual Income Tax Return
Form 40NR - Alabama Individual Income Tax Return (Nonresidents Only)
Disclaimer: Always verify residency status and tax obligations with the official forms and instructions from the Alabama Department of Revenue. For complex situations, consult a qualified tax professional or attorney.