Alabama Capital Gains Tax: 2026 Rules and Calculator
Alabama tops out at 5%, and its deduction for federal income tax paid makes the real state cost on a big gain lower still. Here is what a Alabama seller pays in 2026, layer by layer, and a calculator for your own sale.
Short answer: Alabama taxes capital gains as ordinary income at 2%, 4% and 5%; the 5% rate starts above $6,000 of taxable income for married couples filing jointly and above $3,000 for other filers. On top of that comes federal capital gains tax (0%, 15% or 20% for 2026 under IRS Rev. Proc. 2025-32, and up to 25% on building depreciation) and the 3.8% net investment income tax above $250,000 of income for married couples or $200,000 single (IRC 1411).
Alabama capital gains tax calculator
Enter your sale: rental property, your home, land, a business, stock or collectibles. You get the 2026 tax in Alabama (federal, the 3.8% tax and Alabama tax) and the same sale spread over the years the buyer pays you. It runs in your browser on the same engine as our capital gains tax calculator.
You keep $714,767 after selling costs and tax. The tax is 24% of your gain.
Your gain
- Sale price less selling costs$846,000
- Less your basis$300,000
- Your taxable gain$546,000
- Depreciation, taxed at up to 25%$120,000
- Long-term gain at 0%, 15% or 20%$426,000
The tax, line by line
- Federal income tax$88,505
- Net investment income tax (3.8%)$15,428
- Alabama tax$27,300
- Total tax$131,233
- You keep$714,767
Get the REAL numbers
Talk to capital gains expert Hans Goldstein, EA.
These are estimates. Have a qualified tax professional run your real numbers in a 15-minute scope call.
Why now: the closing date and how the buyer pays you are set before closing, and they decide how much Alabama and federal tax this sale costs.
Book my 15-minute callThis is an estimate. Getting it right down to the tee takes your actual tax forms (returns, K-1s, depreciation schedules), a consult and a paid analysis. The first 15-minute scope call is free.
How Alabama taxes capital gains in 2026
Alabama taxes capital gains as ordinary income at 2%, 4% and 5%; the 5% rate starts above $6,000 of taxable income for married couples filing jointly and above $3,000 for other filers.
- Alabama lets individuals deduct the federal income tax they pay in computing Alabama taxable income (Code of Alabama 40-18-15), which lowers the Alabama tax on a large gain.
Local tax: Alabama city and county occupational taxes are charged on wages, not on capital gains.
Selling Alabama property while living elsewhere: Alabama taxes a nonresident on gain from real estate and other property located in Alabama, so selling Alabama property from another state still means a Alabama return.
Worked example (computed October 13, 2026)
A mid-size Alabama rental sale, where the 25% depreciation layer and the 5% state rate both show. A married couple filing jointly in Alabama sells a rental property for $900,000 with $54,000 of selling costs. Basis is $300,000 after $120,000 of depreciation, and other income is $110,000.
- Taxable gain: $546,000, of which $120,000 is depreciation taxed at up to 25%.
- All in one year (2026): $88,505 federal income tax, $15,428 net investment income tax and $27,300 Alabama tax (5% of the gain): $131,233 in total, 24% of the gain.
- Spread over 10 years on a note: $88,031 of tax on the gain, so the seller keeps $43,202 more. Interest on the note is taxed separately.
What the calculator simplifies
The calculator applies 5% to the gain and does not take the deduction for federal income tax, so it overstates the Alabama tax on a large sale. It also leaves out local taxes unless named above, the alternative minimum tax effect of note interest, and equipment recapture on a business sale. Federal tables for later years carry the 2026 tables forward.
Spreading a Alabama sale over several years
On an installment sale the gain is reported as the buyer pays you (IRC 453), so each year's slice can stay in lower federal brackets and under the 3.8% threshold. Building depreciation is reported first (Treas. Reg. 1.453-12), equipment recapture is taxed in the year of sale (IRC 453(i)), and notes over $5,000,000 owe the Section 453A interest charge. More on how it works: what a structured installment sale is.
Sources
- Alabama Department of Revenue, individual income tax rate FAQ (2025)
- IRS Rev. Proc. 2025-32: 2026 federal brackets.
- IRC 1(h) and IRC 1411: capital gain rates and the 3.8% tax (as in force October 2026).
What is the tax bill on your Alabama sale going to be?
Send me the sale price and rough basis. Within one business day I'll email you the actual number and the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation. Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Frequently asked
What is the capital gains tax rate in Alabama for 2026?
Alabama taxes capital gains as ordinary income at 2%, 4% and 5%; the 5% rate starts above $6,000 of taxable income for married couples filing jointly and above $3,000 for other filers. Federal capital gains tax and the 3.8% net investment income tax come on top.
How much tax on a $900,000 sale in Alabama?
In the example on this page, a married couple filing jointly selling a rental property for $900,000 with a $546,000 taxable gain owes $131,233 in 2026: $88,505 federal, $15,428 net investment income tax and $27,300 Alabama tax. Spread over 10 years, the tax is $88,031.
Do nonresidents pay Alabama tax when they sell property there?
Alabama taxes a nonresident on gain from real estate and other property located in Alabama, so selling Alabama property from another state still means a Alabama return.
Does Alabama have a capital gains deduction or special rule?
Alabama lets individuals deduct the federal income tax they pay in computing Alabama taxable income (Code of Alabama 40-18-15), which lowers the Alabama tax on a large gain