Paycheck Calculator Alabama-AL

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Alabama-AL Paycheck Calculator: Hourly and Salary

Alabama is a beautiful and gorgeous state, hidden in the deep south of the United States. This state possesses plenty of gorgeous beaches, national parks and is famous for its hospitality. Furthermore, this state is one of the cheapest places in the entire US for housing and also one of the excellent destinations for tourism.

Apart from all these perks, the residents always have to deal with payroll taxes, whether it be an employer or employee.

So if you are an Alabamian and looking for a fantastic tool along with a guide to calculating your payroll taxes, and take home paycheck amount, then you are at the right place.

Alabama Tax Facts

  • Alabama State offers its taxpayers the free online tax filing
  • Alabama State is one of the states that put the least burden of taxes in the United States.
  • In 2018, Alabama’s economy grew by precisely 2%, and it is further expected to increase by 1.9% in 2019.
  • The average annual salary is over $39,000 ($18 as an average hourly rate), across all jobs in Alabama State, and it’s almost the same since 2009.
  • The average annual salary in Alabama State ranks 7th out of all 50 states and is much higher than the minimum wage.

How to calculate Paycheck in Alabama

Follow are the steps that every employee and employee needs to consider, working in Alabama.

Step 1: Determine the Pay Type

The first and foremost thing to calculate the paycheck is to determine the Pay Type. It is whether the employee is paid on:

  • Hourly basis: Employee is paid at an agreed hourly rate for the number of hours worked in a day or a week. Here the employee is paid overtime for every extra hour he/she works over regular hours. According to the Fair Labor Standard Act, regular hours are 8 hours in a day or 40 hours a week, and for every extra hour, an employee must be paid at time and half of the regular hourly rate as overtime.
  • Salary basis: Employee is paid a fixed amount for a set number of days regardless of how many hours he/she works. Unfortunately, there is no law for paying overtime to a salaried employee.

Alabama State Laws for Pay Type:

There are no such state laws by Alabama to determine the Hour Worked, Regular Hours. Therefore, employers and employees must follow the guideline provided by U.S Wage and Hours Division and FLSA (Fair Labor Standard Act).

However, Alabama State Law does have laws to regulate overtime, which you will read in Step 3 ahead.

Step 2: Determine the Pay Frequency

The second step is to determine the Pay Frequency of your Paycheck; it is how often you are paid. Some of the standard Pay Frequencies are:

Pay Frequency Details
Weekly The employees are paid once a week.
Bi-Weekly The employees are paid once every two weeks.
Semi-Monthly The employees are paid twice a month. Usually on the 15th and 30th day of the month.
Monthly The employees are paid once every month. Mostly at the start or end of the month.
Quarterly (Discouraged by Alabama State) The employees are paid after every three months.
Annually (Discouraged by Alabama State) The employees are paid once a year.

Alabama State Laws for Pay Frequencies:

Although Alabama doesn't have a Pay Frequency Regulation in its State Law. However, like all other states, Alabama State also has labor law regulations that oblige the employer to pay the employees regularly on scheduled payday. Moreover, it also requires the employers to pay their hourly employees on regular payday at least, monthly, semi-monthly, bi-weekly, or weekly.


Step 3: Determine the Gross Pay

The third step is to determine the Gross Pay of the employee based on the following criteria:

Hourly Employee:

  1. Basic Salary is calculated by multiplying Number of Hours worked in a pay frequency by Regular Hourly Rate.
  2. Overtime pay is calculated according to FLSA law, where every extra hour worked after 40-hours in a week, would be counted as Overtime hour that must be paid in time and half of regular hourly rate.
  3. Double Time Pay is a time that an employer pays in double the regular hourly rate to the employee. It is paid if the employee works on federal holidays. However, their employers are not bound to pay it according to FLSA or Alabama State law.
  4. Now, to deduce the Gross Pay, we need to add Overtime Pay, Double Time Pay, Bonuses, Commissions, fringe benefits, Vacations Pay, Sick Pay, and Holiday Pay (If Any) into Basic Salary.

Salaried Employee:

  1. To determine the gross salary for the employee, start with the annual salary and divide it by the number of pay periods to get a basic salary. For example, if the employee’s annual salary is $25000, and is paid twice a month, then you must divide 25000/24. Therefore, the employee's basic salary is $1042.
  2. Now, add (if any) reimbursements, bonuses, commissions, fringe benefits, or tips to the basic salary of the employee.
  3. Next, you need to add overtime pay into basic salary, only if the salaried employee has a salary equal to or below $455 a week or $23,660 annually. The FLSA regulates this, and the employee must be paid overtime at the rate of time and half of the hourly rate.
  4. Last, subtract any unpaid time off(s) from the basic salary to get Gross Pay.

Alabama State Laws for Gross Pay:

  • There is no Alabama State Law for Minimum wage; therefore, employers in Alabama must pay a minimum wage of $7.25 an hour to their employees. However, if the employee is earning tips as a part of compensation, then the employer is allowed to lower the minimum wage to as low as $2.13 per hour. It is only allowed as long as the collective tip earns by the employee is equal to at least the full minimum wage.
  • Salaried Employees (with salary more than $455 a week or $23,660 annually), as well as managers and professional employees, are exempted from overtime law. Therefore, Employers are not bound to pay them overtime.
  • There are no guidelines found in FLSA and Alabama State law that limits the total number of hours an employee can work as overtime.
  • According to the Family and Medical Leave Act (FMLA), Employers with at least 50 employees must grant 12-weeks of unpaid time-offs per year to the eligible employee for caregiving or illness.

Step 4: Determine the Filing Status:

Here starts the complicated part. After the Gross Pay for the employee is deduced, the next thing an employer has to do is to refer the W-4 tax form that was filled by the employee, while joining the job.

Note:

  • The employee has to update his Form W4, if any significant changes come to his/her life, such as marriage, divorce, or the birth of a baby.
  • The employee also has the authority to make a change in his/her form W4, an unlimited number of times, but only once per paycheck.

This form contains all the essential details, including income tax details, marital status, and the number of allowances to be claimed. These details are required to calculate the Taxable Income, Federal Taxes, Allowances, State Taxes, and Local Taxes, that the employer has to withhold from the employee's salary.

Note: As IRS has made changes in the Tax Form W4, which would be effective from January 2020. Therefore, all the following steps are according to the new form.

There is a total of four filing statuses, from which the employee has to choose one. These are as follow:

  • Single
  • Married filing separately
  • Married filing jointly
  • Head of Household

Note: You can select "Single" as Marital Status on the Alabama Paycheck Calculator if the employee is "Single" or "Married filing separately." Else Choose "Married" if the employee is "Married Filing Jointly" or "Head of Household."


Step 5: Calculating the Taxable Income:

Taxable income is the income, which is used to determine the amount of taxes that should be withheld from the employee’s paycheck by the employer. It is different from Gross Pay.

There is the portion of income that is exempted from the taxes, such as cash gifts, inheritances, rebates, Welfare income, child support, State and local tax refunds, Life insurance, etc. This portion can be determined and claimed by the taxpayer (employee) by using "itemized deductions."

As the "itemized deductions" process is too long, the Taxpayer can also go for "standard deductions (a specific amount defined by the government to be deducted from Gross Pay according to taxpayer’s filing status" instead, for calculating the Taxable Income.

Standard Deduction amount for 2018 to 2025 is as follow:

Filing Status Standard Deduction Amount
Single $12,000
Married Filing Separately $12,000
Married Filing Jointly $18,000
Head of Household $24,000
Qualifying Widow(er)s $24,000

To determine the Taxable income, the taxpayer (employee) has to:

  • Subtract any "Standard deductions" or "Itemized deductions" deductions from the Gross Pay.
  • Subtract any "tax exemptions" such as "dependent exemption"

Note: This is just a general overview of Taxable Income. Many other factors need to be considered for Taxable income determination. Moreover, the criteria can be different from person to person. You must refer to your Lawyer, or study Taxable income in detail for calculating the accurate Taxable Income.


Step 6: Subtracting the Pre-Tax Contributions from Taxable Income:

Once the taxable income of an employee is deduced, the next step is to subtract any pre-tax contributions that were chosen by the employee. These contributions are designed to encourage employees to save for their retirement. Additionally, it further reduces the amount of taxable income, hence, increasing the take-home amount of an employee.

However, not all contributions are exempted from all taxes, but on federal income tax, therefore, some employees may have to pay FICA, state, or other taxes on such contributions.

Here are some common contributions that employee can choose:


  1. A Qualified retirement plan such as a traditional 401(k) or 403(b)
  2. traditional IRA - Individual Retirement Accounts
  3. SEP-IRA, SIMPLE IRA, or Solo 401(k)
  4. A tax-advantaged healthcare savings account (HSA)
  5. Dependent care FSA contributions
  6. Commuter Plan
  7. Health Insurance

Step 7: Deducing the Number of Federal Allowances:

Before jumping on to Federal Taxes, it is important to conclude the number of Allowances that an employee needs to claim.

Allowances are exemptions from paying a certain amount of income tax. Therefore, the amount of withholding tax that an employer withholds from the employee’s paycheck is inversely proportional to the number of allowances claimed.

General Number of Allowances a Taxpayer (Employee) must Claim
Situation Number of Allowances to claim
The taxpayer depends on someone 0 to 1 Allowance
Single – One Job – Taxpayer doesn't depend on anyone 1 to 2 Allowances
Married Couple with no dependents 2
Head of Household with one dependent 3
A married couple with one dependent 3
A married couple with two dependent 4

Effects of Allowances on Federal Taxes

The employee in form W4 already fills details of claimed allowances. The employee must do a complete working before filling out the details for the number of allowances he/she needs to claim as dis-balance can cause him/her to overpay or underpay taxes.

Effects of Allowances on Federal Taxes
Situation Effects on Federal Withholding Taxes Consequences
To many Allowances claimed · Withholding Federal Tax decreases
· Take-Home Pay Increases
· The taxpayer may owe money to IRS
· Tax Payer has to pay the pending tax amount along with penalties
Too few Allowances claimed · Withholding Tax Federal increases
· Take-Home Pay decreases
· IRS may owe money to the taxpayer, for which
· Tax Payer is likely to receive a refund
· Tax Payer may have less money to spend the whole year until the refund is received

Details on how many allowances an employee must claim are provided here.


Step 8:  Subtracting the Federal Taxes

Once the final taxable income is calculated after subtracting all deductions (standard or itemized) and contributions, a certain amount is withheld by the employer from an employee's paycheck as federal income tax along with the two federal (FICA) programs: Social Security and Medicare.

Federal Income Taxes

This Federal Income Tax rate is applied at a gradual level, ranging from 0% to 37% of taxable earnings, depending on the filling status, number of Allowances claimed, and taxable income, so higher the income, higher the federal tax rate. These rates are as follow:

Single Filers
Taxable Income Rate
$0 - $9,525 10.0%
$9,525 - $38,700 12.0%
$38,700 - $82,500 22.0%
$82,500 - $157,500 24.0%
$157,500 - $200,000 32.0%
$200,000 - $500,000 35.0%
$500,000+ 37.0%

Married, Filing Jointly
Taxable Income Rate
$0 - $19,050 10.0%
$19,050 - $77,400 12.0%
$77,400 - $165,000 22.0%
$165,000 - $315,000 24.0%
$315,000 - $400,000 32.0%
$400,000 - $600,000 35.0%
$600,000+ 37.0%

Married, Filing Separately
Taxable Income Rate
$0 - $9,525 10.0%
$9,525 - $38,700 12.0%
$38,700 - $82,500 22.0%
$82,500 - $157,500 24.0%
$157,500 - $200,000 32.0%
$200,000 - $500,000 35.0%
$500,000+ 37.0%

Head of Household
Taxable Income Rate
$0 - $13,600 10.0%
$13,600 - $51,800 12.0%
$51,800 - $82,500 22.0%
$82,500 - $157,500 24.0%
$157,500 - $200,000 32.0%
$200,000 - $500,000 35.0%
$500,000+ 37.0%

FICA Taxes (Social Security and Medicare):

In addition to the Federal Income Tax, Employees are also subjected to FICA Tax (Federal Insurance Contributions Act). These taxes are used for helping American citizens with retirement, disability, survivorship, and medical treatment which comprises:

  1. Social Security Tax

A total of 12.4% of FICA tax is paid for Social Security, by both employee and employer. Here 6.2% is paid by Employee and remain 6.2% is funded by the employer. However, the Social Security tax is only applicable to the first $132,900 (in 2019) earned. No amount is charged above this earning,

  1. Medicare Tax

1.45 percent each is paid to Medicare by both employee and employer. Moreover, if the taxpayer (employee or employer) earns more than $200,000 as a single filer or $250,000 as a married couple than additional Medicare taxes of 0.9% are to be paid.


Note: If you are calculating your federal taxes as an employer, you have to add FUTA unemployment taxes in addition to FICA taxes, which is 6% of the first $7,000 of each employees taxable income. However, if you pay full Alabama State Unemployment Taxes on time, then you can avail tax credit of up to 5.4%.


Some points related to Federal Withholdings Taxes for Alabama State:

  • The employee is exempted from paying federal tax if, in the previous tax year, he/she has received a refund of all federal income tax withheld from his/her paycheck because he/she had zero tax liability.
  • The employee is exempted from paying federal tax if, in the current year, he/she is expecting to receive a refund of all federal income tax withheld because he/she expects to have zero tax liability again. If the employee thinks that he/she qualifies for this exemption (for example, because his/her income is quite low), he/she can indicate this on his/her W-4 Form.
  • The Alabama Legislation would remove Social Security taxes (6.2% of gross wages) paid as a deduction from the state individual and self-employed income tax but leaves intact the 1.45 percent Medicare tax deduction.

Step 9: Subtracting State Taxes:

All the employees in Alabama, who receive or income during the year, are subjected to Alabama State Tax. This amount is withheld from each employee's paycheck by the employer.

The employer has to calculate the Alabama State Tax according to the form A4, filled by the employee while starting the job (the employee should update this form if significant life change occurs like marriage, divorce, etc.).

What is the state withholding tax rate for Alabama?

In Alabama, just three income tax rates and tax brackets are to be considered. They are as follow:

Single Filers
Alabama Taxable Income Rate
$0 - $500 2.00%
$500 - $3,000 4.00%
$3,000+ 5.00%

Married, Filing Jointly
Alabama Taxable Income Rate
$0 - $1,000 2.00%
$1,000 - $6,000 4.00%
$6,000+ 5.00%

Married, Filing Separately
Alabama Taxable Income Rate
$0 - $500 2.00%
$500 - $3,000 4.00%
$3,000+ 5.00%

Head of Household
Alabama Taxable Income Rate
$0 - $500 2.00%
$500 - $3,000 4.00%
$3,000+ 5.00%

Alabama State Tax Allowances (Personal Exemptions):

Like, Federal Tax allowances, the Alabamian employee can also claim Alabama State Allowances, according to the filing status.

Personal Exemptions from Alabama State Tax
Filing Status Exemption Amount
Single $1500
Married Filing Separately $1500
Married Filing Jointly $3000
Head of Family $3000

Step 10: Subtracting the Local Taxes

In addition to Alabama State Taxes, the employees are also subjected to pay local income taxes (Occupational Taxes) on the Gross Wage (not your taxable income), ranging from 0 to 2%. However, these local tax deduction amounts can be decreased if your particular city, county, or area offers any allowances.

Exact Rates are as follow: 

CityOccupational Tax Rate
Attalla2.00%
Auburn1.00%
Bear Creek1.00%
Bessemer1.00%
Birmingham1.00%
Brilliant1.00%
Fairfield1.00%
Gadsden2.00%
Glencoe2.00%
Goodwater0.75%
Guin1.00%
Hacklebug1.00%
Haleyville1.00%
Hamilton1.00%
Irondale1.00%
Leeds1.00%
Lynn1.00%
Midfield1.00%
Mosses1.00%
Opelika1.50%
Rainbow City2.00%
Red Bay0.50%
Shorter1.00%
Southside2.00%
Sulligent1.00%
Tuskegee2.00%

Other Deductions by Alabama State:

  • Unlike many other states, Alabama State doesn't charge for state disability insurance. However, it does charge Alabama State Unemployment Insurance (SUI) on the employers only, at the rate range from 0.65% to 6.8%. Moreover, new employers are given the advantage of paying a flat rate of 2.7%. However, as we have said earlier, that if the employer pays his tax in full and on time than ye get a tax credit on a huge FUTA tax.

Step 11: Subtracting the Post-Tax Deductions and Contributions

Although employees are not charged any post-tax deductions. However, they can choose some post-tax contributions and benefits. If an employee has opted some, then its employer's duty to account them into the employee's paycheck.

Some of the common Post-Tax Contributions are:

  • Retirement funds like Roth 401(k).
  • A certain amount may also be withheld by the employer from the employee's paycheck as Wage Garnishments if the employee is subjected to any court-ordered garnishments.
  • Contributions to 529 college savings plans, Union dues or charitable donations.

Step 12: Calculating Paycheck

Once you have calculated all the details, as discussed above, then it's time to enter all your details into our Alabama Paycheck Calculator and deduce the paycheck amount instantly.

FAQs

Answer: The percentage taken out of your paycheck in Alabama range from 2% to 5%, exactly depending on factors like taxable income, filing status, and number of Allowances claimed. 

Answer: The average annual wage is over $39,000 in Alabama.

Answer: The overtime in Alabama is taxed the same as regular hours. However, in some circumstances, your overall taxable income, including overtime wage, increases enough to be included in a higher tax bracket than your Federal Tax and Alabama State Tax rate will increase accordingly.

Answer: Yes, Alabama has a state income tax, with three tax brackets of 2%, 4%, and 5%. In addition to Alabama State Income Tax, you may also be charged with local tax (occupational taxes) depending on which city or county of Alabama, you live in.

Note: Occupational Taxes are discussed in detail in the above guide.

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