Alabama Alabama Individual Nonresident Income Tax Instructions

Alabama Individual Nonresident Income Tax Instructions
40NR Booklet TY 2023_12-21-23_F.pdf
Form

40NR
Booklet

revenue.alabama.gov
 Nonresidents Only  Forms and Instructions

2023

myalabamataxes.alabama.gov

Index
A
Address Change … 14
Addresses of Taxpayer Service
Centers … 3
Alimony or Separate Maintenance
Amount paid … 13
Amount received … 11
Amended Return … 14
Amount You Owe … 10
Annuities … 11
Armed Forces, Members of … 4

B
Business income or (Loss)
(Federal Schedule C) … 12
Business Use of Home … 19

C
Casualty and Theft Losses … 18
Corresponding With Alabama
Department of Revenue … 14

G
Gains … 12 and 19
General Information … 14
Gifts to Charity … 17

H
Head of Family … 6

I
Income (Examples) —
You Must Report … 7
You Do Not Report … 7
Income Tax Withheld (Alabama) … 8
Income Tax Deduction (Federal) … 8, 13 and 27
Interest Income … 11 and 19
Interest — Late Payment of Tax … 14
Interest — Penalty on Early
Withdrawal of Savings … 13
Individual Retirement Arrangement (IRA) … 12
Itemized Deductions … 8 and 15

K
Keogh Plan — Deduction For … 12

D
Death of Taxpayer … 14
Dependents … 9
Dividend Income … 11 and 19
Domicile … 4

E
E-Check … 10
Educational Expenses … 19
Employee Business Expenses … 18
Estates and Trusts … 12 and 20
Estimated Tax … 10 and 15
Extension of Time to file … 15

L

Federal Tax Deduction … 8, 13 and 27
Figuring Your Income Tax … 9, 21-26
Filing Requirements —
When To File … 5
Where To File … 11
Which Form To File … 5
Who Must File … 4
Filing Status —
Which Box To Check … 6
Forms, How To Get … 29

Q
Qualified Long-Term Care … 18

R
Records — How Long To Keep … 14
Refund, When Should I Receive? … 15
Rents and Royalties … 12 and 20
Requesting a Copy of Your Tax Return … 14
Rounding Off To Whole Dollars … 7 and 8

S

Losses … 12 and 19

M
Married Persons — Filing Joint or
Separate Return … 6
Medical and Dental Expenses … 16
Military Personnel —
Residents of Alabama … 4
Nonresidents of Alabama … 4
Moving Expenses … 13
Miscellaneous Itemized Deductions … 18
Mutual Funds … 19

F
Farm Income or (Loss) … 12

Credit Card … 10
ACH Debit (E-Check) … 10
Penalty —
Criminal Liability … 14
Late Filing … 14
Late Payment of Tax … 14
Other Penalties … 14
Pensions … 11
Personal Exemption … 6
Preparer, Tax Return … 11

N
Name and Address … 6
Nonresidents of Alabama —
Which Form To File … 5
Who Must File … 4

O

S Corporations … 12 and 20
Salaries … 8
Schedules A, B, D, E, no Sch. CR
on 40NR … 15-20
Self-employed Health
Insurance Premiums … 13
Setoff Debt Collection … 15
Sign Your Return … 11
Single Person … 6
Social Security Number … 6
Standard Deduction … 8 and 9
Steps For Preparing Your Return … 5
Students and Dependents … 5
Substitute Forms … 14

T
Tax Assistance for Taxpayers … 3
Tax Tables … 21-26

Other Income … 8 and 12

P

W

Partnerships … 12 and 20
Payments —
Check/Money Order … 10

What’s New … 2
Where to file Form 40NR … 11

What’s New For 2023
Identity Quiz – If you happen to receive a notice to complete an ID Confirmation
Quiz, it is not because you are suspected of ID theft. The purpose of the quiz is to protect your identity as the filer and prevent loss of taxpayer dollars to thieves.
Credits – Certain tax credits are now required to be pre-approved through My Alabama Taxes (MAT) at www.myalabamataxes.alabama.gov. Please see the credit instructions in this booklet and Schedule OC instructions for more information.
Schedule RS – Complete Schedule RS to report fully or partially taxable pensions,
annuities, IRA distributions (include SEP, Keogh, 401(k)(2), 403(b) distributions), other
distributions and retirement distributions exempt from Alabama Income.
Retirement Exemption – Act 2022-294 Effective Jan 1, 2023, exempts the first
$6,000 of taxable retirement income for those 65 years of age or older. See Schedule
RS Instructions for more information.

Volunteer Emergency Responders Tax Credit – Act 2022-298 Effective Jan 1,
2023, provides an income tax credit for volunteer firefighters and paramedics providing proof of 30 hours or more of qualifying training during the tax year. See Schedule
OC for more information.
Innovate Alabama Tax Credit – Act 2023-33 Effective Jan 1, 2023, authorizes a
tax credit to taxpayers making a cash contribution to economic development organizations (EDO) approved by Innovate Alabama. See Schedule OC for more information.
Adoption Credit – Act 2022-299 effective Jan 1, 2023, increases the adoption
credit to $2,000 provided both the qualifying children and parents are residents of Alabama.
Negative numbers – Please enter all negative numbers with negative signs (-). Do
not use parenthesis ( ).

★

★ Huntsville

Shoals

★

Gadsden

Tuscaloosa

★

Jefferson/
★
Shelby
Auburn/Opelika

★
★

Montgomery

Dothan

★

Mobile

★

Physical Addresses of Taxpayer Service Centers
Alabama income tax assistance may be obtained by calling or visiting any of the Alabama Department of Revenue Taxpayer Service Centers listed below. Additional forms
and instructions may also be obtained from these centers.
 Montgomery Taxpayer Service Center
 Huntsville Taxpayer Service Center
 Auburn/Opelika Taxpayer Service Center
2545 Taylor Road
4920 Corporate Drive, Suite H
1800 Samford Trace Court, Suite 100
Montgomery, AL 36117
Huntsville, AL 35805
Auburn, AL 36830
Phone – (334) 242-2677
Phone – (256) 837-2319
Phone – (334) 887-9549
 Shoals Taxpayer Service Center
 Jefferson/Shelby Taxpayer Service Center
 Dothan Taxpayer Service Center
201 South Court Street, Suite 200
2020 Valleydale Road, Suite 208
121 Adris Place
Florence, AL 35630
Hoover, AL 35244
Dothan, AL 36303
Phone – (256) 383-4631
Phone – (205) 733-2740
Phone – (334) 793-5803
 Tuscaloosa Taxpayer Service Center
 Mobile Taxpayer Service Center
 Gadsden Taxpayer Service Center
1434 22nd Avenue
851 E. I-65 Service Road South, Bel Air Tower, Suite 100
701 Forrest Avenue
Tuscaloosa, AL 35401
Mobile, AL 36606
Gadsden, AL 35901
Phone – (205) 759-2571
Phone – (251) 344-4737
Phone – (256) 547-0554
3

Refund Status
To check the status of your current year refund, go to our website at www.revenue.alabama.gov,
then click on “Where’s My Refund,” or call our 24-hour toll-free Refund Hotline at 1-855-894-7391.

How To Use This Instruction Booklet
The instructions for Form 40NR are divided into five main sections.
 SECTION 1 contains information on who must file, how to choose the correct form, and when to
file a return.
 SECTION 2 contains useful steps to help you prepare your return.
 SECTION 3 contains specific instructions for most of the lines on your return.
 SECTION 4 contains general information about such items as amending your tax return, how long
to keep records, and when you should receive your refund.
 SECTION 5 contains instructions for completing most of the schedules that may be attached to
Form 40NR.
If you follow the steps in Section 2 and the specific instructions in Section 3, you should be able to fill
in your return quickly and accurately.

SECTION

1

Filing
Information

First, be certain you need to file a tax return. Your
marital status, filing status, and gross income determine whether you have to file a tax return. Gross income usually means money, goods, and property
you received on which you must pay tax. It does not
include nontaxable benefits. See page 7 of the instructions to find out which types of income you
should include.

Other Filing Requirements
Refunds. Even if your gross income was less
than the amounts shown, you must file a return to
get a refund if Alabama income tax was withheld
from any amounts paid to you.

Domicile. Individuals who are domiciled in (or
residents of) Alabama are subject to tax on their entire income whether earned within or without Alabama. This is true regardless of their physical
presence within Alabama at any time during the taxable year. Domicile is where one lives, has a permanent home, and has the intention of returning
when absent. Domicile may be by birth, choice, or
operation of law. Each person has one and only one
domicile which, once established, continues until a
new one is established coupled with the abandonment of the old. Burden of proof regarding change of
domicile is on the taxpayer even though he/she
owns no property, earns no income, and has no
place of abode in Alabama.
If an Alabama resident accepts employment in a
foreign country for a definite or indefinite period of
time with the intent of returning to the United States,
the individual remains an Alabama resident and all
income, wherever earned, is subject to Alabama income tax. This is true even if the taxpayer leaves no
property in Alabama.

If a citizen of a foreign country comes to Alabama
to work (no matter how long he stays), buys a home,
secures an Alabama driver’s license, does not intend to apply for U.S. Citizenship, and intends to ultimately return to the country of origin, the individual
will be considered to have established domicile in
Alabama. In other words, a foreign citizen domiciled
in Alabama is liable for Alabama income tax on income earned from all sources.
Military Personnel (Residents). Military personnel whose legal residence is Alabama are subject to Alabama income tax on all income regardless
of the source or where earned unless specifically exempt by Alabama law.
Military personnel (Army, Navy, Marine, Air
Force, Merchant Marine, and Coast Guard) who
were residents of Alabama upon entering military
service remain residents of Alabama for income tax
purposes regardless of the period of absence or actual place of residence until proof of change in home
of record has been made. The burden of proof is on
the taxpayer though he owns no property, earns no
income, or has no place of abode in Alabama. Under
the provisions of the Soldiers’ and Sailors’ Civil Relief Act, military personnel are not deemed to have
lost their permanent residence in any state solely
because they are absent in compliance with military
orders. In addition, persons are not deemed to have
acquired permanent residence in another state when
they are required to be absent from their home state
by virtue of military orders. If the husband and wife
are both in military service, each could be a resident
of a different state under the Soldiers’ and Sailors’
Civil Relief Act. A spouse not in military service has
the same domicile as his/her spouse unless proven
otherwise.
Military Personnel (Nonresidents). Nonresident military personnel merely having a duty station
within Alabama (whose legal residence is not Alabama) are not required to file an Alabama income
tax return unless they have earned income from Alabama sources other than military pay. If they have
earned income in Alabama other than military pay,
they are required to file Alabama Form 40NR. A married nonresident with income earned in Alabama
may file either a separate return claiming himself or

You Must File A Return If…
You were a:
Full Year
Resident

Part Year
Resident

Nonresident

and your marital status at the end of 2023 was:
Single (including divorced and legally separated)
Married and living with your spouse at the end
of 2023 (or on the date your spouse died)
Single (including divorced and legally separated)
Married and living with your spouse at the end
of 2023 (or on the date your spouse died)
Single (including divorced and legally separated)
Married and living with your spouse at the end
of 2023 (or on the date your spouse died)

and your filing status is:
Single
Head of family
Married, joint return
Married, separate return
Single
Head of family
Married, joint return
Married, separate return
Single or head of family
Married, joint return
Married, separate return
4

and your gross income was at least:
$ 4,500
$ 8,200
$11,500
$ 5,750
$ 4,500 (while an Alabama resident)
$ 8,200 (while an Alabama resident)
$11,500 (while an Alabama resident)
$ 5,750 (while an Alabama resident)
Over the allowable prorated exemption.

herself only, or a joint return claiming the total allowable personal exemption. The “Military Spouses
Residency Relief Act” (Public Law 111-97) states that
the income for services performed by the spouse of a
service member shall not be deemed to be income for
services performed or from sources within a tax jurisdiction of the United States if the spouse is not a resident of the jurisdiction in which the income is earned
because the spouse is in the jurisdiction solely to be
with the service member serving in compliance with military orders.

Dependent’s and Student’s Income. Dependents who are residents of Alabama must file a return
if they meet the requirements under You Must File
A Return IF… on page 4. A student’s income is fully
taxable to the same extent as other individuals who
are required to file a return. If a return is required,
the dependent or student can claim a personal exemption of $1,500 and his or her parents may claim
a dependent exemption if they provided more than
50% of the total support. See Dependent Exemption
on page 9.

When To File
You should file as soon as you can after January
1, 2024, but no later than the due date of the federal
return. If you file late, you may have to pay penalties
and interest. (See Penalties and Interest on page
14.) If you know you cannot file your return by the
due date, you do not need to file for an extension.
You will automatically be granted an extension until
October 15, 2024. If you anticipate that you will owe
additional tax on your return, you should submit your
payment with a payment voucher (Form 40V) with
the box “Automatic Extension Payment” checked by
the due date of the federal return.
Except in cases where taxpayers are abroad, no
extension will be granted for more than 6 months.
An extension means only that you will not be assessed a penalty for filing your return after the due
date. Interest on the additional tax due from the due
date of the return and any penalties will be assessed
if applicable to your return.
Original returns must be filed within two years of
the date the taxes are paid to be eligible for a refund. Criminal liability could result from a continued
failure to file returns. (Refer to “Criminal Liability”
on Page 14.)

Which Form To File
You MAY Use Form 40A If You Meet
ALL The Following Conditions:
 You were a resident of Alabama for the entire
year,
 You do not itemize deductions,
 You do not claim any adjustments to income
such as an IRA deduction, alimony paid, federal income tax paid for a prior year, etc.,
 You do not have income from sources other
than salaries and wages, except for interest and div-

idend income, which cannot exceed $1,500,
 You are not claiming income or a loss from
Schedules C, D, E, or F, and
 You are not claiming credit for taxes paid to
another state.

You MUST Use Form 40 If:
 You were a full or part-year resident of Alabama and do not meet ALL of the requirements to
file Form 40A, and
 You are itemizing deductions.

You MUST Use Form 40NR If:

rectly. Remember, even if your return is prepared incorrectly by someone else, you are still responsible.
Itemized Deductions. If you itemize deductions
(Forms 40 or 40NR), some of the records you need
are:
 Medical and dental payment records.
 Real estate and personal property tax receipts.
 Interest payment records for a home mortgage.

Step 2
Obtain any forms or schedules you
may need.

 You are not a resident of Alabama and you
received taxable income from Alabama sources or
for performing services within Alabama and your
gross income from Alabama sources exceeds the
allowable prorated personal exemption, or filing Married Filing Joint under the “Military Spouses Residency Relief Act.” Nonresidents must prorate the
personal exemption. If your Alabama gross income
exceeds the prorated amount, a return must be filed.

The fastest way to obtain forms is to download them from our website www.revenue.
alabama.gov. Also see page 29 for more
information.

You MUST Use Both Form 40 and
Form 40NR If:

Step 4

 You had sufficient income to require the filing
of a part-year return and also had income from Alabama sources while a non-resident during the same
tax year. In this case, both the total personal exemption and the dependent exemption must be
claimed in the part-year resident return. No exemption can be claimed on the nonresident return. The
part year resident return should include only income
and deductions incurred during the period of residency. The nonresident return should include only
income and deductions incurred during the period of
non-residency.

SECTION

2

Steps for Preparing
Your Return

By following these five useful steps, and reading
the specific instructions that follow, you should be
able to prepare your return quickly and accurately.

Step 1
Collect all your necessary records.
Income Records. These include any Forms W2, W-2G, and 1099 that you have. If you do not receive a Form W-2 by February 1, OR if the one you
receive is incorrect, please contact your employer
as soon as possible. Only your employer can give
you a Form W-2, and only he or she can correct it.
If you have someone prepare your return for you,
make sure that person has all your income and expense records so he or she can fill in your return cor5

Step 3
Check your return to make sure
it is correct.
See Common Mistakes on page 11.

Sign and date your return.
Form 40, 40A, or 40NR is not considered a return unless you sign it. Please sign in black ink
only. Your spouse must also sign if it is a joint return.
Original signatures are required or the return will not
be accepted.

Step 5
Attach all necessary
forms and schedules.
Attach the state copies of all Forms W-2, W-2G,
1099’s and completed copy of your federal form to
the front of your return. Attach schedules and forms
in sequential order starting with Form 40NR.
If you need more space on forms or schedules,
attach separate sheets and use the same format as
the printed forms, but show your totals on the printed
forms. Please use sheets that are the same size as
the forms and schedules. Be sure to put your name
and social security number on these separate
sheets, and attach them at the end of the return.
Before mailing your return, check to make sure
you have retained an exact copy for your records. If
you owe tax, be sure to include payment and Form
40V with your return. Please see page 10 for additional payment options.

SECTION

3

Specific
Instructions

Name and Address
Please type or print your name, address, and social security number in the appropriate blocks.
If you live in an apartment, please include your
apartment number in the address. If the post office
delivers mail to your P.O. Box number rather than
to your street address, write the P.O. Box number
instead of your street address.

Social Security Number
Each year thousands of taxpayers file returns
using an incorrect social security number. Usually
this number belongs to another taxpayer. It is very
important that you file your return using the correct
social security number. Failure to use your correct
social security number(s) in the space(s) provided
WILL DELAY the processing of your refund. Listed
below are a few of the common reasons that a social security number is reported incorrectly:
 failure to place number on return,
 memorized wrong number,
 copied number wrong,
 gave an incorrect number to the tax preparer,
 gave your employer an incorrect number.
IMPORTANT: Check your W-2 forms. Your employer may be reporting an incorrect number for you.
If you are married and filing a joint return, write
both social security numbers in the blocks provided.
If you are married and filing separate Alabama
returns, write your spouse's social security number
on line 3.
If your spouse is a nonresident alien, has no income, does not have a social security number, and
you file a separate return, check the "NRA" box and
leave the block for your spouse's social security
number blank. If you and your spouse file a joint return, your spouse must have a social security number.
If you or your spouse do not have a social security number, please get Form SS-5 from a Social Security Administration (SSA) office. File it with your
local SSA office early enough to get your number
before April 15.
IMPORTANT: Notify the Social Security Administration (SSA) immediately in the event you have
changed your name because of marriage, divorce,
etc., so the name on your tax return is the same as
the name the SSA has on record. This helps prevent
delays in processing your return.

Filing Status and Personal
Exemption Lines 1 through 4

ily if, and only if, such individual is not married at the
close of their tax year, is not a surviving spouse and
their qualifying dependent is not a foster child.

You should check only the box that describes
your filing status. The personal exemption will be determined by your filing status on the last day of the
tax year.

You may check the box on line 4 ONLY IF on
December 31, 2023, you were unmarried or legally
separated and meet either test 1 or test 2 below:

Single
Consider yourself single if on December 31, you
were unmarried or separated from your spouse either by divorce or separate maintenance decree.

Test 1. You paid more than half the cost of
keeping up a home for the entire year provided that
the home was the main home for your parent whom
you can claim as a dependent. Your parent did not
have to live with you in your home.

If you check box 1, multiply $1,500 by the percentage on line 10, and enter the result on line
15.

OR

Married
Joint or Separate Returns?
Joint Returns. Most married couples pay less
tax if they file a joint return. You must report all income, exemptions, deductions, and credits for you
and your spouse. Both of you must sign the return
even if only one of you had income. Common law
marriages entered into before January 1, 2017, are
recognized by the State of Alabama for income tax purposes.

You and your spouse can file a joint return if you
were living together on December 31, 2023, even if
you did not live together for the entire year. Both of
you are responsible for any tax due on a joint return,
so if one of you does not pay the other may have to.
Note: If you file a joint return, you may not, after the
due date of the return, choose to file separate returns for that year.
If your spouse died in 2023, you can file a joint
return for 2023. You can also file a joint return if your
spouse died in 2024 before filing a 2023 return. For
details on how to file a joint return, see Death of
Taxpayer on page 14.
If you check box 2, multiply $3,000 by the percentage on line 10, and enter the result on line
15.
Separate Returns. You can file separate returns
if both you and your spouse had income, or if only
one of you had income.
If you file a separate return, report only your own
income, exemptions, deductions, and credits. You
are responsible only for the tax due on your return.
Note: Alabama is not a community property state.
If you file a separate return, write your spouse’s
social security number in the space on line 3.
If your spouse does not file, attach a statement
explaining why your spouse is not required to file.
If you check box 3, multiply $1,500 by the percentage on line 10, and enter the result on line
15.

Head of Family
An individual shall be considered Head of Fam6

Test 2. You paid more than half the cost of
keeping up a home in which you lived and in which
one of the following also lived for more than 6
months of the year (temporary absences, such as
for vacation or school, are counted as time lived in
the home):
a. Your unmarried child, grandchild, greatgrandchild, etc., adopted child, or stepchild. This
child does not have to be your dependent.
b. Your married child, grandchild, great-grandchild, etc., adopted child, or stepchild. This child
must be your dependent. However if your child’s
other parent claims him or her as a dependent under
the federal rules for Children of Divorced or Separated Parents, this child does not have to be your
dependent.
c. Any relative whom you can claim as a dependent. (See definition of a dependent on page 9.)
If the person for whom you kept up a home was
born or died during the year, you may still file as
Head of Family if the home was that person’s main
home for the part of the year he or she was alive.
If you check box 4, multiply $3,000 by the percentage on line 10, and enter the result on line
15.

Special Rules
A nonresident taxpayer who receives income
from Alabama sources or for performing services
within Alabama and who also had income while a
resident of Alabama during the same tax year must
file both the Alabama Nonresident Form 40NR and
the Alabama part-year Form 40. If you are required
to file both returns, the total personal exemption
and the dependent exemption must be claimed
on the part-year return (Form 40). No personal
exemption or dependent exemption can then be
claimed on the nonresident return (Form 40NR).

Income
A nonresident of Alabama is subject to tax on all
income received within or for services performed in
Alabama and amounts received from the sale of
property located in Alabama unless specifically exempt. The term “income” includes, but is not limited
to; salaries, wages, commissions, income from business or professions, alimony, rents, royalties, inter-

est, dividends, and profits from sales of real estate,
stocks, or bonds. Military pay is not taxable for nonresidents of Alabama.

Examples of Income
You MUST Report
The following kinds of income should be reported
on Forms 40, 40A, or 40NR and related forms and
schedules. You may need some of the forms and
schedules listed below:
 Wages including salaries, fringe benefits,
bonuses, commissions, fees, and tips.
 Dividends (Schedule B).
 Interest (Schedule B) on: bank deposits,
bonds, notes, Federal Income Tax Refunds, mortgages on which you receive payments, accounts
with saving and loan associations, mutual savings
banks, credit unions, etc.
 Original Issue Discount (Schedule B).
 Distributions from an Individual Retirement
Arrangement (IRA) including SEPs (Simplified Employee Pension) and DECs, if you excluded these
amounts in a prior year.

 Interest on obligations of the State of Alabama or any county, city, or municipality of Alabama.

States.
 Director’s fees.
 Fees received as an executor or administrator of an estate.
 Embezzled or other illegal income.
 Refunds of Federal Income tax if previously
deducted in a prior year and resulted in a tax benefit.
 Payments received as a member of a military
service generally are taxable except for combat pay
and certain allowances.
 Jury duty pay.
 Nonqualified Withdrawal from Alabama College Counts 529 Fund.

Examples of Income
You DO NOT Report
Do not include these amounts when deciding if
you must file a return.
 United States Retirement System benefits.
 State of Alabama Teachers’ Retirement System benefits.

 Bartering income (fair market value of goods
or services you received in return for your services).

 State of Alabama Employees’ Retirement
System benefits.

 Business expense reimbursements you received that are more than you spent for the expenses.

 State of Alabama Judicial Retirement System
benefits.

 Amounts received in place of wages from accident and health plans (including sick pay and disability pensions) if your employer paid for the policy.

 Tennessee Valley Authority Pension System
benefits.

 Alimony or separate maintenance received
from and deductible by your spouse or former
spouse.
 Life insurance proceeds from a policy you
cashed in if the proceeds are more than the premium
you paid.
 Profits from businesses and professions
(Federal Schedule C or C-EZ).
 Your share of profits from partnerships and S
Corporations (Schedule E).
 Profits from farming (Federal Schedule F).
 Lump-sum distributions.
 Gains from the sale or exchange (including
barter) of real estate, securities, coins, gold, silver,
gems, or other property (Schedule D).
 Gains from the sale of your personal residence as reported on your Federal return (Schedule D).
 Rents and Royalties (Schedule E).
 Your share of estate or trust income (Schedule E).
 Prizes and awards (contests, lotteries, and
gambling winnings) (W-2G).
 Income from sources outside the United

 Military retirement pay.

 United States Government Retirement Fund
benefits.
 Payments from a Defined Benefit Retirement
Plan in accordance with IRC 414(j). Contact your
retirement plan administrator to determine if
your plan qualifies.
 Federal Railroad Retirement benefits.
 Federal Social Security benefits.
 State income tax refunds.
 Unemployment compensation.
 Welfare benefits.
 Disability retirement payments (and other
benefits) paid by the Veteran’s Administration.
 Workman’s compensation benefits, insurance
damages, etc., for injury or sickness.
 Death benefits received by a designated beneficiary of a peace officer or fireman killed in the line
of duty.
 Child support.
 Gifts, money, or other property you inherit or
that was willed to you.
 Dividends on veteran’s life insurance.
 Life insurance proceeds received because of
a person’s death.
7

 Interest on obligations of the United States or
any of its possessions.
 Amounts you received from insurance because you lost the use of your home due to fire or
other casualty to the extent the amounts were more
than the cost of your normal expenses while living in
your home. (You must report as income reimbursements for normal living expenses.)
 Military allowances paid to active duty military, National Guard, and active reserves for quarters, subsistence, uniforms, and travel.
 Subsistence allowance received by law enforcement and corrections officers of the State of
Alabama.
 All retirement compensation received by an
eligible fire fighter or a designated beneficiary from
any Alabama firefighting agency.
 All retirement compensation received by an
eligible peace officer or a designated beneficiary
from any Alabama police retirement system.
 Income earned while serving as a foreign
missionary after first serving 24 months as a missionary in a foreign country.
 Compensation received from the United
States for active service as a member of the Armed
Forces in a combat zone designated by the President of the United States.
 An amount up to $50,000 for Tax Years 2020
and forward and $25,000 for Tax Years 2019 and
prior received as severance, unemployment compensation or termination pay, or as income from a
supplemental income plan, or both, by an employee
who, as a result of administrative downsizing, is
terminated, laid-off, fired, or displaced from his or
her employment, shall be exempt from state income
tax. If the exempt severance pay is included in
your state wages, contact your employer for a
corrected W-2.
 Beginning January 1, 1998, all benefits received from Alabama Prepaid Affordable College
Tuition Contracts (PACT).
 Qualified withdrawals from an Alabama 529
savings plan.
 Beginning January 1, 2016, all income, interest, dividends, gains or benefits of any kind received
from an ABLE (Achieving Better Life Experience)
savings account.
 Effective with tax year 2020, insurance benefits received by a certified firefighter as a result of a
cancer diagnosis to any extent the amounts are included in the federal adjusted gross income of the
taxpayer and are not exempt under any other law.
For more information please see Act 2019-361.

Rounding Off To Whole Dollars
Round off cents to the nearest whole dollar on
your return and schedules. You can drop amounts

under 50 cents. Increase amounts from 50 to 99
cents to the next dollar. For example: $1.39 becomes $1.00, and $2.69 becomes $3.00.

Line 5
Wages, Salaries, Tips, Etc.
Alabama tax withheld information must be reported on Schedule W-2. (See Schedule W-2 instructions for more information.)
The amount withheld is shown on the state copy
of your Form W-2. This copy should be marked “To
Be Filed With Your Alabama Income Tax Return.”
Note: Do not change or alter the amount of tax withheld or wages reported on your Form W-2. If any
amount is incorrect or illegible, you should contact
your employer and request a corrected statement.
Do not include these taxes as Alabama income
tax:





Federal income tax,
FICA tax (Social Security and Medicare),
Local, city, or occupational tax, or
Taxes paid to another state.

In Column A – Alabama tax withheld, enter the
total amount from Schedule W-2, Line 18, Column
G.
Income From ALL Sources. Report income
from all sources on Schedule W-2, Column H.
See Schedule W-2 instructions for more information. Show the total amount of wages, salaries,
fees, commissions, tips, bonuses, and other
amounts you were paid before taxes, insurance, etc.
were taken out.
This includes the income earned in Alabama as
well as the income earned outside of Alabama. Even
though the income earned outside of Alabama is not
taxable to Alabama, it must be included in order to
determine the ratio of Alabama income to total income from all sources. This determines the personal
exemption, dependent exemption, and itemized deductions or standard deduction you may claim in arriving at the income on which you figure the amount
of tax you owe Alabama.
In Column B – “All Sources” enter the total income from Schedule W-2, Line 18, Column H.

more than the amount taxable for federal purposes.
This is due to the fact that amounts deducted from
their wages as “Contributions to the Alabama State
Retirement System” qualify for deferral on the federal return, but do not qualify for deferral on the Alabama return.

ployee, you should show these amounts as other
adjustments to income. The amount that needs to
be entered on line 11, will come from the total other
adjustments on page 2, part 3, line 4 and line 6 of
your return. See instructions for page 2, part 3, on
page 13 of this booklet for more instructions.

Statutory Employees. If you were a statutory
employee, the Statutory employee box of your W-2
form should be checked. Statutory employees include full time life insurance salespeople, certain
agent or commission drivers and traveling salespeople, and certain homeworkers.

Line 12

Please see the Schedule W-2 instructions for information on how to report your “Statutory Employee” wages.

Adjusted Gross Income
If the amount on Column C, line 12 is less than
zero you may have a net operating loss that you can
carry to another tax year. If you carry the loss back
to earlier years, you should check the amended return box on your Form 40NR and attach Form NOL85 and/or Form NOL-85A.

Line 13

Line 6

Itemized or Standard Deduction

Other Income
All taxable income you received that is not reported on line 5 should be entered on line 6. This includes interest income, dividends, rents, royalties,
gains from sale of property, etc.
See Examples of Income You DO NOT Report
and Examples of Income You MUST Report on
page 7 of these instructions for further details on income which should be included on this line.
If you have income from other sources, you must
complete page 2, Part I and attach the appropriate
schedule(s).

Line 8
Adjustments to Income
If you made payments to an Individual Retirement Arrangement (IRA), Keogh Retirement Plan,
Simplified Employee Pension (SEP), paid self-employment health insurance premiums, incurred
penalties for the early withdrawal of funds, or incurred deductible moving expenses, then these
items should be shown as an adjustment to income.
For more information on the above deductions
see the instructions on page 12 for page 2, Part II .
The adjustments to income from Part II, line 8
should be entered on page 1, line 8.

Line 10
Alabama Percentage of Adjusted
Total Income

You have the option to either itemize your deductions or you may claim the optional standard deduction. You should compute your deduction both
ways to determine the option that gives you the
larger deduction. If you elect to claim the standard
deduction on your return and it later becomes necessary to change to itemized deductions, you may
do so by filing an amended return.
If married and filing separate returns, both
spouses must claim the same deduction unless the
spouses have lived apart for the entire year, in which
case each spouse may claim either deduction. However, neither spouse may claim a deduction for expenses paid by the other. See the instructions for
Schedule A for items that may be claimed as an
itemized deduction.
Itemized Deductions. If you elect to itemize
your deductions, you should check box a on line 13
and complete and attach Schedule A. The amount
shown on line 30 of Schedule A should be entered
on line 13.
Standard Deduction. If you elect to claim the
Standard Deduction, you should check box b on line
13, and use the chart on the next page to determine
the Standard Deduction allowable on your return. A
dependent or student may take the standard deduction even if claimed as a dependent by someone
else. The Standard Deduction must be prorated by
the percentage on page 1, line 10.

Alabama Income. Report all W-2 information
on Schedule W-2. See Schedule W-2 instructions
for more information. On column C – “Alabama Income”, enter the amount from Schedule W-2, Line
18, Column I. The amount shown in the box headed
“State Wages” on your Form W-2 should be included on Schedule W-2. Report all wages, salaries,
fees, commissions, tips, bonuses, and other
amounts of income that were earned in Alabama
even if you do not have a Form W-2. (These
amounts should also have been included in Column
B.)

You must divide the amount on line 9, Column
C, by the amount on line 9, Column B, to determine
the ratio of Alabama Adjusted total income to the Adjusted total income from all sources. If the amount in
Column C is larger than the amount in Column B,
you should enter 100% on line 10. If the amount in
Column C is a loss (less than 0) enter 0% on line 10.

Other Adjustments

Line 15

Note: State of Alabama employees will find that the
amount taxable for state purposes is, in most cases,

If you paid alimony, adoption expenses and/or
qualifying health insurance for a small employer em-

Personal Exemption

Line 11

8

Line 14
Federal Income Tax Deduction
A nonresident of Alabama may deduct from Alabama adjusted gross income a portion of the Federal income tax due on the 2023 Federal income
tax return. In order to determine the amount deductible, you must complete page 2, Part IV of Form
40NR. The instructions for completing Part IV are on
page 13 of this booklet.

Enter the personal exemption amount from line

1, 2, 3, or 4 multiplied by the percentage on line 10.
A dependent or student may take the personal exemption even if claimed as a dependent by someone
else.

Line 16
Dependent Exemption
A dependent as defined under Alabama law is
an individual other than the taxpayer and his or
her spouse who received over 50% of his or her
support from the taxpayer during the tax year and
is also related to the taxpayer in one of the following
relationships:
Son
Stepfather
Daughter
Mother-in-law
Stepson
Father-in-law
Stepdaughter
Brother-in-law
Legally adopted child
Sister-in-law
Parent
Son-in-law
Grandparent
Daughter-in-law
Grandchild
If related by blood:
Brother
Uncle
Sister
Aunt
Stepbrother
Nephew
Stepsister
Niece
Stepmother
Note: You cannot claim a foster child, friend, cousin,
yourself, or your spouse as a dependent under Alabama law.
Birth or Death of Dependent. You can take an
exemption for a dependent who was born or who
died during 2023 if he or she met the qualifications
for a dependent while alive.

Support. You must have provided over 50% of
the dependent’s support in 2023. If you file a joint
return, the support can be from you or your spouse.
You cannot claim credit on an Alabama return for a
dependent if you provided less than 50% of the support under Alabama law as you can under federal
law in certain conditions.
If you are married and filing a separate return,
you must consider only the amounts you separately
furnished out of your income in determining whether
or not you provided over 50% of the dependent’s
support. Do not include any amounts your spouse
furnished for the support of the dependent.
In figuring total support, you must include money
the dependent used for his or her own support even
if this money was not taxable (for example: gifts, savings, welfare benefits). If your child was a student, do
not include amounts he or she received as scholarships.
Support includes items such as food, a place to
live, clothes, medical and dental care, recreation,
and education. In figuring support use the actual cost
of these items. However, the cost of a place to live
is figured at its fair rental value.
In figuring support, do not include items such as
income taxes, social security taxes, premiums for
life insurance, or funeral expenses.
If you qualify to claim your child and/or other individuals as your dependent, you must complete on
page 2, Part V. The total credit entered on page 2,
Part V, line 4 should be entered on page 1, line 16.

Amount on
Dependent
Col. B, Line 12, Page 1 Exemption
0 - 50,000
50,001 - 100,000
Over 100,000

1,000
500
300

Line 19
Figuring Your Tax
You must figure your tax from the Tax Tables on
pages 21-26 unless you are claiming a carryover or
carryback net operating loss from another year.
Indicate the method you are using by checking
the appropriate box. If you are claiming a net operating loss from another year, you must complete and
attach Form NOL-85A.

Line 20
Net Tax Due Alabama
If you are using tax credits to reduce your tax liability, Schedule OC must be completed in order to
compute your net tax due. You must check the box
to indicate you are using Schedule OC to compute
your net tax due. If you do not have any tax credits,
enter the amount from line 19.

Credits - Schedule OC
Schedule OC must be completed for a credit claim
and Individual taxpayers must register to set up an
account in My Alabama Taxes (MAT) at
www.myalabamataxes.alabama.gov for approval
before claiming certain credits on their tax return.
Once logged into MAT, a taxpayer will need to lo-

Standard Deduction
Married Filing Joint
____________________________
Adjusted Gross
Standard
Income (Col. B, Line 12) Deduction
$ 0 – $25,999
$26,000 – $26,499
$25,500 – $26,999
$27,000 – $27,499
$27,500 – $27,999
$28,000 – $28,499
$28,500 – $28,999
$29,000 – $29,499
$29,500 – $29,999
$30,000 – $30,499
$30,500 – $30,999
$31,000 – $31,499
$31,500 – $31,999
$32,000 – $32,499
$32,500 – $32,999
$33,000 – $33,499
$33,500 – $33,999
$34,000 – $34,499
$34,500 – $34,999
$35,000 – $35,499
$35,500 and above

$8,500
$8,325
$8,150
$7,975
$7,800
$7,625
$7,450
$7,275
$7,100
$6,925
$6,750
$6,575
$6,400
$6,225
$6,050
$5,875
$5,700
$5,525
$5,350
$5,175
$5,000

Married Filing Separate
____________________________
Adjusted Gross
Standard
Income (Col. B, Line 12) Deduction
$ 0 – $12,999
$13,000 – $13,249
$13,250 – $13,499
$13,500 – $13,749
$13,750 – $13,999
$14,000 – $14,249
$14,250 – $14,499
$14,500 – $14,749
$14,750 – $14,999
$15,000 – $15,249
$15,250 – $15,499
$15,500 – $15,749
$15,750 – $15,999
$16,000 – $16,249
$16,250 – $16,499
$16,500 – $16,749
$16,750 – $16,999
$17,000 – $17,249
$17,250 – $17,499
$17,500 – $17,749
$17,750 and above

Head of Family
____________________________
Adjusted Gross
Standard
Income (Col. B, Line 12) Deduction

$4,250
$4,162
$4,074
$3,986
$3,898
$3,810
$3,722
$3,634
$3,546
$3,458
$3,370
$3,282
$3,194
$3,106
$3,018
$2,930
$2,842
$2,754
$2,666
$2,578
$2,500

$ 0 – $25,999
$26,000 – $26,499
$26,500 – $26,999
$27,000 – $27,499
$27,500 – $27,999
$28,000 – $28,499
$28,500 – $28,999
$29,000 – $29,499
$29,500 – $29,999
$30,000 – $30,499
$30,500 – $30,999
$31,000 – $31,499
$31,500 – $31,999
$32,000 – $32,499
$32,500 – $32,999
$33,000 – $33,499
$33,500 – $33,999
$34,000 – $34,499
$34,500 – $34,999
$35,000 – $35,499
$35,500 and above
9

$5,200
$5,065
$4,930
$4,795
$4,660
$4,525
$4,390
$4,255
$4,120
$3,985
$3,850
$3,715
$3,580
$3,445
$3,310
$3,175
$3,040
$2,905
$2,770
$2,635
$2,500

Single
____________________________
Adjusted Gross
Standard
Income (Col. B, Line 12) Deduction
$ 0 – $25,999
$26,000 – $26,499
$26,500 – $26,999
$27,000 – $27,499
$27,500 – $27,999
$28,000 – $28,499
$28,500 – $28,999
$29,000 – $29,499
$29,500 – $29,999
$30,000 – $30,499
$30,500 – $30,999
$31,000 – $31,499
$31,500 – $31,999
$32,000 – $32,499
$32,500 – $32,999
$33,000 – $33,499
$33,500 – $33,999
$34,000 – $34,499
$34,500 – $34,999
$35,000 – $35,499
$35,500 and above

$3,000
$2,975
$2,950
$2,925
$2,900
$2,875
$2,850
$2,825
$2,800
$2,775
$2,750
$2,725
$2,700
$2,675
$2,650
$2,625
$2,600
$2,575
$2,550
$2,525
$2,500

cate the “Individual Income Tax” account type, then
select “Submit a Credit Claim” from the “Tax Incentives” section on the right margin of the page and
follow a short series of steps to reserve their credit.
For individuals who do not have a MAT account or
are unable to set up a MAT account, go to the MAT
homepage, select “Submit an Individual Credit
Claim” from the “Individuals” section on the main
page and follow a short series of steps to reserve
your credit. If the credit claimed on an individual income tax return is from a Schedule K-1 issued by a
pass through entity, the credit claim will be submitted by the entity and no action is required by the individual. Supporting documentation for certain
credits is required to be uploaded in MAT. Taxpayers needing assistance with reserving a tax credit
may call (334) 353-9770 or (334) 353-0602.
While all tax credits are reported on Schedule OC,
some require a separate schedule to be completed
before entering the results on Schedule OC and
some require a MAT account to reserve their credit
approval before submission on Schedule OC.
Please visit the Department’s website for more information on the Schedule OC and Schedule OC instructions for each of the following tax credits:
Alabama Enterprise Zone Credit, Basic Skills Education Credit, Rural Physician Credit, Coal Credit,
Full Employment Act of 2011 Credit, Veterans Employment Act – Employers Credit, Veterans Employment Act- Business Start Up Expense Credit,
Qualified Irrigation System/Reservoir System tax
Credit, Alabama Accountability Tax Credit- School
Transfer Credit, Alabama Accountability Act Credit –
Scholarship Granting Organization (SGO) credit,
Alabama Adoption Credit, 2013 Alabama Historic
Rehabilitation Tax Credit, Career Technical Dual Enrollment Credit, Investment Credit – Alabama Jobs
Act, Alabama Renewal Act – Port Credit, Alabama
Renewal Act – Growing Alabama Credit, Apprenticeship Tax Credit, 2017 Alabama Historic Tax Rehabilitation Credit, Railroad Modernization Act of
2019 Credit, Storm Shelter Credit, Volunteer Emergency Responders Tax Credit, Innovate Alabama
Tax Credit, and the Income Tax Capital Credit. For
more information on credits see Schedule OC.

Line 22
2023 Estimated Tax Payments/
Automatic Extension Payments
Enter on this line any payments you made on
your estimated Alabama income tax (Form 40ES) for
2023 or automatic extension (Form 40V). Include any
overpayments from your 2022 return that you applied
to your 2023 estimated tax. (Do not include the balance you paid with your 2022 return in 2023 or any
overpayment from 2022 that was refunded to you.)
If you and your spouse paid joint estimated tax
but are now filing separate Alabama income tax returns, either of you may claim all of the amount paid,
OR you can each claim a part of it. Please be sure to
show both social security numbers on the separate
returns. If you and your spouse paid separate estimated tax but are now filing a joint income tax return,

add the amounts you each paid. These instructions
also apply if your spouse died during the year.

Line 29

Caution: It is very important that the social security
numbers be the same on your current return, last
year’s return, and all of your estimate vouchers. The
department will be unable to allow you proper credit
for your payments unless the numbers are the same.
If the department is unable to verify the amount
claimed, you may be requested to submit copies of
all your canceled checks substantiating the amount
claimed. This will cause considerable delay in processing your return.

(If line 20 is larger than line 28)

Name Change. If you changed your name because of marriage, divorce, etc., and you made estimated tax payments using your former name,
attach a statement to Form 40NR explaining all the
payments you and your spouse made in 2023 and
the name(s) and social security number(s) under
which you made the payments.

Line 23
Composite Tax Payments/Electing
PTE Credit
If you are reporting income from a partnership or
S corporation which filed Alabama Form PTE-C, any
payment made on your behalf should be entered on
Schedule CP. For tax years beginning on or after
January 1, 2021, Act 2021-423 allows the owner,
member, partner, or shareholder of an electing passthrough entity reporting income to be allowed a refundable credit in an amount equal to its pro rata or
distributive share of the Alabama income tax paid by
the electing pass-through entity with respect to the
corresponding tax year. This amount needs to be reported on Schedule CP. The amount from Schedule
CP, Section B, line 1 should be entered on line 23.

Line 24
Previous Payments
This line is for amended returns only. Enter the
amount of your previous payment made with your
original return and/or billing notices and amended
return(s).

Line 25
Refundable Credit
This line is only for the refundable portion of
Alabama Accountability Act, Adoption Credit, or
Historic Tax Rehabilitation Act of 2017 Credit.
Enter the amount from Schedule OC, Section F,
line F4.

Line 27

Amount You Owe
Subtract line 28 from line 20 and add line 30, and
enter the amount on line 29 – this is the amount you
owe the State of Alabama.
Pay the full amount by check or money order
payable to the “Alabama Department of Revenue.”
On your payment write your social security number,
your daytime telephone number, and “2023 Form
40NR,” and remit your payment with Form 40V.

Credit Card: For other payment options, please
visit our website for more information.

How do I pay by ACH Debit (E-check)? You
may pay by ACH Debit by going to
www.myalabamataxes.alabama.gov. Do not use
Form 40V when paying by ACH Debit. You will need
to have your bank routing number and checking account number to use this service. No fee is charged
for this service.
If you are paying with funds on a foreign bank
you must include an additional $25 exchange
fee.
If payment for the full amount of tax due is not
paid by the due date of the return, you will be
charged interest and will be subject to penalties.
(See Penalties and Interest on page 14 of these
instructions.) More importantly, if you submit your return without payment, a final assessment may be
entered by the Department. A final assessment
which is not appealed is as conclusive as a judgment of a circuit court. The Department may then
proceed with collection by issuance of legal
processes including recording of tax liens, garnishment of wages or bank accounts, levy, or a
writ of seizure directed to the county sheriff as provided by Sections 40-1-2, 40-2-11(16), and 40-2923, Code of Alabama 1975.

Line 30
Estimated Tax Penalty
If the amount you owe (line 29) exceeds
$500.00, you may be subject to an estimate, or underestimation penalty. Page 14 of this booklet provides additional information on these penalties, or
you can complete Form 2210AL. See page 29, “How
To Obtain Forms.”

Line 31
Overpayment

Previous Refund
This line is for amended returns only. Enter the
amount of your previous refund from your original
return and amended return(s).

10

(If line 28 is larger than line 20)
Subtract line 20 from line 28, and enter the
amount on line 31 — this is the amount you overpaid.

Line 32
Applied to 2024 Estimated Tax
You may elect to credit all or part of the overpayment shown on line 31 to your 2024 estimated
Tax. Once an election is made to apply this overpayment to your 2024 estimated tax, it cannot later
be refunded to you or applied to pay additional tax
for 2023.

Line 33
Refunded to You

help you file your form correctly:
1. Is your address correct?
2. If you took the standard deduction, did you use
the chart on page 9?
3. Did you include your W-2 forms and any other
forms? Did you assemble all forms and schedules
in the proper order? (See Step 5 on page 5.)
4. Is your math correct? (Note: Check your math
carefully when figuring your refund or amount you
owe.)

If line 31 is greater than zero, subtract lines 30
and 32 from the amount on line 31. If your return is
complete and contains no errors, you should receive
your refund within 8 to 12 weeks after you mail it.
See When Should I Receive My Refund? on page
15 of this booklet for further information about your
refund.

5. Did you find the correct tax in the Tax Table for
your filing status and taxable income?

Sign Your Return

If you want the Department to contact your tax
preparer, please give permission to do so by checking the box above the signature line.

Form 40NR is not considered a return unless
you sign it. Please sign in black ink only. Your
spouse must also sign if it is a joint return. If you are
filing a joint return with your deceased spouse, see
Death of Taxpayer on page 14.
Did You Have Someone Else Prepare Your
Return? If you fill in your own return, the Paid Preparer’s Use Only area should remain blank. Someone who prepares your return but does not charge
you should not sign.
Generally, anyone who is paid to prepare your
tax return must sign your return and fill in the other
blanks in the Paid Preparer’s Use Only area of the
return.
If you have questions about whether a preparer
is required to sign a return, please contact an Alabama Taxpayer Service Center.
The preparer required to sign your return MUST:
 Sign, by hand, in the space provided for the preparer’s signature. (Signature stamps or labels are
not acceptable.)
 Give you a copy of your return for your records in
addition to the copy to be filed with the Alabama
Department of Revenue.
BEFORE signing and mailing your return, you
should review it to make sure the preparer has entered the correct name(s), address, and social security number(s) in the spaces provided and
reported all of your income. REMEMBER, you are
responsible for the information on your return even
if you pay someone else to prepare it.
Please enter your daytime phone number. This
will enable us to contact you and help speed your
refund if there are any problems with processing
your return.

Common Mistakes
Which Delay Refunds
Errors delay your refund. This checklist should

6. Did you write your social security number, daytime phone number, and “2023 Form 40NR” on your
check or money order?
7. Did you sign and date your tax form?

Where To File
If you are receiving a refund (Form 40NR, line
33), mail your return to:
Alabama Department of Revenue
P.O. Box 154
Montgomery, AL 36135-0001
If you are making a payment (Form 40NR, line
29), mail your return, Form 40V and payment to:
Alabama Department of Revenue
P.O. Box 2401
Montgomery, AL 36140-0001
If you are not receiving a refund or making a payment, mail your return to:
Alabama Department of Revenue
P.O. Box 327469
Montgomery, AL 36132-7469

Page 2, Part I
Other Income
All taxable income other than salaries, wages,
commissions, etc. that is not reported on page 1, line
5 should be reported in page 2, Part I.
The total other income from all sources should
be reported in Column B under the heading “All
Sources.” The income reported in Column B should
be the same as would be reported by a resident of
Alabama.
Example: You may be required to report interest
income from obligations of the U.S. Government on
your federal return, but since this income is not taxable to Alabama it should not be included in Column
B.
All income you listed in Column B earned in the
State of Alabama should also be listed in Column C
11

under the heading “Alabama Sources.” Use only the
lines and schedules applicable to your types of
income.

Line 1
Interest and Dividend Income
Any interest or dividend income received in 2023
with Alabama legal jurisdiction should be reported
in Column C. All other interest or dividend items that
would normally be taxable to an Alabama resident
should be reported in Column B.
Note: Interest or Dividend items received from pass
through entities such as Partnerships or S-Corporations should not be reported as separate line items
on Schedule B, but should be included in total on
the Alabama Schedule E.
If you received dividends and interest income of
more than $1,500 in 2023, you must complete and
attach Schedule B. Enter the taxable amount shown
in Schedule B on Part I, line 1.

Line 2
Alimony Received
Alimony and separate maintenance payments
received by a nonresident of Alabama in 2023 are
not taxable for Alabama purposes. However, any
amounts you received in 2023 must be included in
the total adjusted gross income from all sources to
the same extent that it is includable on your 2023
Federal return. The amount received should be
listed in Column B only. Do not include amounts you
received which are child support.

Line 3
Pensions and Annuities
Pension and annuity payments received by a
nonresident are not subject to Alabama tax. However, pension and annuity payments you received
in 2023 that would be taxable to a resident of Alabama must be included in the total adjusted gross
income from all sources in order to compute the ratio
of Alabama adjusted gross income to total adjusted
gross income from all sources:
Payments you received from any of the following are not taxable and should not be included in the
income reported on line 3:
 State of Alabama Teachers’ Retirement.
 State of Alabama Employees’ Retirement.
 State of Alabama Judicial Retirement.
 United States Civil Service Retirement.
 Retirement systems created by the Federal Social Security Acts.
 Railroad retirement benefits received under the
Federal Railroad Retirement Acts of 1935 and
1937.
 Military Retirement Pay.
 TVA Pension System Benefits.

 U.S. Foreign Service Retirement and Disability
Fund Annuities.
 U.S. Government Retirement Fund Benefits.
 Any Defined Benefit Retirement Plan in accordance with IRC 414(j). Contact your retirement
plan administrator to determine if your plan
qualifies.
Complete Schedule RS to report all pensions
and/or annuities you received in 2023 that would be
taxable to a resident of Alabama. The amount to be
reported would be the same as reported on your
Federal return except for income from those sources
previously listed as exempt.

Line 4
Business Income or (Loss)
If you conducted a business or practiced a profession during the taxable year, you must complete
and attach a copy of Federal Schedule C or C-EZ
to your Alabama return.
Generally, you may deduct the ordinary and necessary expenses of doing business — the cost of
merchandise, salaries, interest, taxes, rent, repairs,
and incidental supplies.
In the case of capital investments and improvements in depreciable property such as buildings, machines, and similar items having a useful life of more
than one year, Alabama law provides for a “reasonable allowance” for depreciation over the useful life
of the property.
If some of your expenses are part business and
part personal, you can deduct ONLY the business
portion.
Adjustments to Federal Schedules C and F. Alabama law differs from federal law in the treatment of
some of the expenses shown on Federal Schedules
C, and F, and certain items may need adjusting for
Alabama purposes. The expenses which may need
adjusting are:
 Percentage Depletion Gas and Oil. In the case
of oil and gas wells, the allowance for depletion
shall be 12 percent of the gross income from the
property during the taxable year, excluding from
such gross income an amount equal to any rents
or royalties paid or incurred by the taxpayer in respect to the property. Such amounts shall not exceed 50 percent of the net income of the
taxpayer, computed without allowance for depletion, from the property, except that in no case
shall the depletion allowance be less than the
amount allowable under federal income tax law.
 Cost Depletion Natural Resources Other than
Gas and Oil. Alabama law has no provision for
percentage depletion of natural resources other
than gas and oil, as currently allowed under federal law. For Alabama purposes, the depletion allowance shall be computed using the cost
depletion method.
 Depreciation. Alabama law allows IRC Section
179 Expense for all taxable years beginning after

December 31, 1989. Adjustments may be necessary if assets were acquired and placed in
service prior to tax years beginning January 1,
1990.
 Targeted “Jobs Credit.” You may have been
allowed to take a portion of your payroll expense
as a “Targeted Jobs Credit” on your federal return. This is an allowable expense for Alabama
income tax purposes.

Schedule F.
The net profit or (loss) from farm operations,
within and without Alabama, should be entered on
line 7, Column B. The net profit or (loss) from farm
operations in Alabama should also be entered in
Column C.

Line 8
Other Income

 Passive Activity Losses. Alabama law has no
provision, similar to current federal law, which
limits the deduction of passive trade or business
activity losses.

Enter on line 8 any other income you cannot find
a place for on your return or on another schedule.
State the nature and source in the space provided,
or attach a separate explanation.

If you have adjustments involving any of the previously described expenses, attach an explanation
and show the adjustment as “Other Expenses” on
Federal Schedule C or F.

The total other income from all sources should
be entered in Column B, and only the other income
earned in Alabama should be entered in Column C.

The net profit or (loss) from business, as shown
on Federal Schedule C-EZ or C after above adjustments (if applicable), should be entered on Part I,
line 4. The net profit or (loss) from all operations
within and without Alabama, as shown on Federal
Schedule C, after above adjustments (if applicable),
should be entered on Part I, line 4, Column B. The
net profit or (loss) from operations in Alabama
should be entered in Column C.

Line 5
Gain or (Loss) from Sale of
Real Estate, Stocks, Bonds, Etc.
If you sold real estate, stocks, bonds, or other
assets in 2023 the net gain or (loss) should be entered in column B. The net gain or (loss) from the
sale of property located in Alabama should also be
entered in Column C.
If you sold your personal residence, any gain realized is taxable to the same extent as reported on
your federal return.
Please see the instructions for Schedule D for
further information.

Line 6
Rents, Royalties, Partnerships,
Estates, Trusts, S Corporations
You must complete and attach Schedule E if
you received income in 2023 from any of these
sources. The instructions for completing Schedule
E are on page 20 of this booklet.

Foreign Income Exclusion. If you are entitled to
a foreign income exclusion, please attach a copy of
your Federal Form 2555 to your return and report
the amount of your exclusion as a credit with a negative sign (Example: -30,000) on line 8 Other Income
on page 2 of your return. All foreign income must be
reported on your return, in order to receive any foreign income exclusion.
Nonqualified Distribution from Alabama 529
Savings Plan. If you receive a distribution from your
Alabama 529 Savings plan and do not use the distribution to pay qualified expenses, the amount not
used for qualifying expenses is taxable. Enter the
amount of the nonqualified distribution plus 10% of
the distribution and description on line 8, Columns B
and C, Other Income.
Nonqualified Withdrawal from ABLE Savings
Account. If you make a nonqualified withdrawal as
defined by Internal Revenue Code (26 U.S.C 529A),
the amount of the nonqualified withdrawal, plus 10
percent of the amount withdrawn, shall be taxable
as income in the year of the nonqualified withdrawal.
Report this amount on line 8, Columns B and C,
Other Income.
Note: Net operating losses are not allowed as a deduction on line 8 (Other Income). Net operating
losses can only be claimed on Form NOL-85A.

Page 2, Part II
Adjustments To Income

Line 1

Line 7
Farm Income or (Loss)
If you operated a farm during the year, you must
attach Federal Schedule F to your return.
Alabama law differs from Federal law in the treatment of some of the expenses shown on Federal
Schedule F. These differences are discussed in the
instructions for line 4, Part I. If any of these adjustments apply to your return, you should show the additional amounts as “Other Expenses” on Federal
12

Individual Retirement Arrangement
(IRA), Keogh Retirement Plan, and
SEP Deduction
Contrib