Alabama House approves $37.4 million overtime tax cut, 60-day grocery tax holiday
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The Alabama House of Representatives has passed HB527 by Rep. James Lomax (R-Huntsville), which would eliminate up to $1,000 in state income tax on qualified overtime pay. Rep. Mike Shaw (R-Hoover) offered an amendment to include a 60-day Grocery Tax Holiday.
HB527 creates an income tax deduction for qualified overtime compensation. This bill was designed after President Trump’s “no tax on overtime” policy included in the “Big Beautiful Bill” by providing state-level tax relief on overtime pay in the form of a capped tax deduction.
- Under the bill, taxpayers may deduct up to $1,000 in overtime pay from their state taxable income each year.
- The deduction would apply to tax years beginning in 2026 and expire after 2028, unless extended.
- The initial fiscal note for HB 527 was $37.4 million. Rep. Shaw’s amendment brings the total fiscal note to $83.4 million.
Rep. Lomax touted his bill as a practical solution to easing financial burdens facing working families in the state of Alabama.
“Everyone knows that Alabama is one of the lowest taxed states in the nation, but as a member of the House, working to ensure our state remains a place working families keep as much of their hard-earned money as possible will always be a top priority,” said Lomax. “The men and women working overtime shifts to provide for their families are also providing a significant boost to our state’s economy, and I am proud to carry this legislation in an effort to support and thank them.”
In 2023, the Alabama State Legislature reduced the state’s tax on groceries from 4% to 3% and established a path towards its full elimination. During the 2025 Legislative Session, the House elected to accelerate the elimination of the grocery tax by cutting it from 3% to 2% as a key component of a broader effort to address affordability concerns across the state.
“Throughout not only this session, but the entire quadrennium, members of the House and Senate have consistently worked to lighten the financial load that working families are feeling across the state,” said House Speaker Nathaniel Ledbetter. “With fuel prices surging and the price of beef and other essential items at the grocery store nearing all-time highs, it is imperative that state leaders double down on our efforts to lend a helping hand to Alabamians. Over the course of the last few weeks, I have worked with Gov. Ivey and Senate leadership to determine the most expedient and impactful way to provide targeted relief, and we have determined that a 60-day grocery tax holiday presents the best opportunity to lift up every single Alabama family.”
Alabama families are already saving roughly $236 a year from the existing 2% grocery tax cut, and a temporary two-month suspension of the remaining 2% would deliver roughly $40 more in immediate relief for a typical family of four.
Since 2022, the Alabama Legislature has delivered more than $1.4 billion in tax cuts to working families and retirees across our state.
A detailed list of cuts is included below:
- Act 2022-37 / 2022-75 (HB231, SB152) – Child Tax Credit Exclusion — $90 million
- Act 2022-53 (HB82) – Small Business Relief — $4.4 million annually
- Act 2022-294 (HB162) – Retirement Income Tax Cut — $29 million annually
- Act 2022-297 / 2022-292 (HB163, SB19) – Dependent Exemption Increase — $17.2 million annually
- Act 2022-252 (HB391) – Business Privilege Tax Cut — $23 million annually
- Act 2022-298 (HB253) – EMS Tax Credit — $3.6 million annually
- Act 2022-299 (HB487) – Adoption Tax Credit Expansion — $3.8 million annually
- Act 2023-377 (SB86) – One-Time Tax Rebate — $393 million
- Act 2023-421 (HB217) – Overtime Tax Exemption — $230 million
- Act 2023-554 (HB479) – Grocery Tax Cut (Phase 1) — part of $246 million total
- Act 2024-21 (HB129) – CHOOSE Act (Education Tax Credits) — $530 million (3-year total)
- Act 2024-400 (HB51) – Hearing Instrument Tax Exemption — $3.1 million annually
- Act 2024-344 (HB73) – Property Tax Cap — $275,000 annually
- Act 2024-170 (HB209) – Military Pay Tax Exemption — $2.1 million annually
- Act 2025-305 (HB386) – Grocery Tax Cut (Phase 2) — part of $246 million total
- Act 2025-204 (HB152) – Pink Tax Cut — $13 million annually
- Act 2025-204 (HB543) – Business TPP Tax Exemption Increase — $3.6 million annually
Act 2025-402 (HB52) – ABLE Extension + CHOOSE Act Expansion — included in $530 million total
