Alabama offers a variety of tax credits that may reduce your Alabama tax liability. Some credits are available to individual taxpayers, while others require a credit certificate, approval from a state agency, or information from a pass-through entity.
Pathway to this entry is:
Alabama State Return > Credits
Credit for Taxes Paid to Another State
This credit may be available if the same income was taxed by both Alabama and another state.
The credit helps prevent double taxation of income earned outside Alabama.
For more information please see our KB article here.
Basic Skills Education Credit
This credit may be available to taxpayers who participate in qualifying workplace basic skills education programs.
Rural Physician Credit
This credit is available to qualifying physicians who practice in designated rural areas of Alabama.
Full Employment Act Credit
This credit may be available to employers who create qualifying jobs and meet Alabama program requirements.
Veterans Employment Credit (Employer)
This credit may be available to employers who hire qualifying veterans.
Veterans Employment Credit (Business Startup)
This credit may be available to qualifying veteran-owned startup businesses operating in Alabama.
Credit for Taxes Paid to a Forgiving County
This credit may apply when income is taxed by a qualifying county outside Alabama that grants a reciprocal credit.
Qualified Irrigation System / Reservoir System Credit
This credit may be available for qualifying irrigation or reservoir systems used in agricultural operations.
Accountability Tax Credit (School Transfer)
This credit may be available to taxpayers who incur expenses associated with transferring a student from a failing school to a qualifying school.
Accountability Tax Credit (Scholarship Granting Organization)
This credit may be available for contributions made to approved Scholarship Granting Organizations.
Adoption Tax Credit
This credit may be available for qualifying adoption expenses related to the adoption of an eligible child.
For more information please see our KB article here.
2013 Historic Tax Rehabilitation Credit
This credit is available for approved rehabilitation projects involving qualifying historic structures.
Coal Credit
This credit may be available for qualifying coal production or coal-related activities that meet Alabama requirements.
Jobs Act Investment Credit
This credit is available to qualifying businesses that make eligible investments and create jobs under the Alabama Jobs Act.
Port Credit
This credit may be available to qualifying taxpayers using Alabama port facilities that meet established requirements.
Alabama Renewal Act Credit (Growing Alabama)
This credit is generally associated with approved economic development and rural growth projects under the Growing Alabama program.
2017 Historic Tax Rehabilitation Credit
This credit may be available for approved rehabilitation of qualifying historic properties under the current Alabama rehabilitation program.
Innovate Alabama Credit
This credit may be available for qualifying investments and activities approved through Innovate Alabama programs.
Alabama Workforce Housing Tax Credit
This credit supports the development of qualifying workforce housing projects in Alabama.
Employer Tax Credit
This credit may be available to employers that meet the requirements of specific Alabama employment incentive programs.
Childcare Facility Tax Credit
This credit may be available to taxpayers who construct, operate, maintain, or support qualifying childcare facilities.
Employer Provider Credit
This credit may be available to employers who provide qualifying benefits or services under Alabama incentive programs.
Capital Credit
This credit is used to report qualifying Alabama capital credits approved through eligible programs.
Attach PDF of K1/K1C to Support Capital Credit
If claiming a Capital Credit from a pass-through entity, upload a copy of the supporting:
- Schedule K-1
- Schedule K-1C
- Other supporting documentation showing the credit allocation
Credit Carryforward Prior Years
Use this section to report eligible Alabama credits carried forward from prior tax years.
You should retain documentation showing:
- Original credit amount
- Prior-year usage
- Remaining carryforward balance
Additional Credits
The following credits are entered directly by amount when applicable:
Railroad Modernization Credit
Available for qualifying railroad modernization expenditures.
Storm Shelter Credit
Available for qualifying storm shelter purchases or installations that meet Alabama requirements.
Enterprise Zone Act Credit
Available for qualifying activities conducted within an approved Alabama Enterprise Zone.
For more information please see our article here.
Volunteer Emergency Responders Tax Credit
Available for qualifying volunteer emergency responders.
Some taxpayers may be required to maintain a certificate supporting eligibility for the credit.
Volunteer Fire Department Mileage Income Tax Credit
Available to qualifying volunteer firefighters for eligible mileage expenses.
Preceptor Tax Incentive Credit
Available to qualifying healthcare professionals who serve as approved preceptors under Alabama's program requirements.
How Do These Credits Affect My Return?
Credits entered in this section may:
- Reduce Alabama tax liability.
- Increase an Alabama refund.
- Reduce the amount owed with the return.
- Allow previously approved credits to be utilized.
Important Information
- Many Alabama credits require approval, certification, or other supporting documentation.
- Credit amounts should be entered exactly as shown on the supporting documents.
- Some credits are refundable, while others may only reduce tax liability.
- Certain credits may be carried forward to future tax years.
- Keep all certificates, approval letters, K-1s, and supporting documentation with your tax records.
Additional Information
Review all credit certificates, award letters, Schedules K-1, K-1Cs, and other supporting documents before completing the Credits section. Only enter credits for which you have received supporting documentation or otherwise qualify under Alabama law.