Update applicable to:

All employers conducting business in Alabama

What happened?

Alabama has passed House Bill 217 (HB 217) to exclude from gross income for state income tax purposes the compensation received by full-time, hourly wage-paid employees for work performed beyond 40 hours in a week.

What are the details?

Starting January 1, 2024, until June 30, 2025, compensation for work beyond 40 hours per week will not be subject to Alabama state income tax.

Employers with employees subject to Alabama state income tax must provide the following information to the Alabama Department of Revenue (DOR):

• By January 31, 2024, the total amount of compensation paid to full-time, hourly wage-paid employees for work exceeding 40 hours in a week and the total number of employees who received it for the tax year starting January 1, 2023.
• For tax years beginning on or after January 1, 2024, and onward, the total compensation paid to full-time, hourly wage-paid employees for work exceeding 40 hours in a week and the total number of employees who received it. This information must be provided monthly or quarterly, and the deadline will be the due date for the corresponding monthly or quarterly withholding tax returns.

For more information, please see the links below:

Official Bill Page

Bill HB217 (scroll to page 4 of document to view the applicable information)

Article 1, Article 2

What do employers need to do?

From January 1, 2024, to June 30, 2025, employers with employees subject to Alabama state income tax should exclude compensation paid to full-time employees working over 40 hours in a week from the gross income for state income tax purposes. Employers must comply with the reporting requirements by submitting the necessary information to the Alabama DOR as described in the provided details.

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