The start of October means a collection of new state laws go into effect in Alabama. One gives a sales tax exemption to supplies needed by beekeepers in the State. Another is meant to toughen licensing rules for people who pilot boats on Alabama waterways. Another of these new measures aims to clarify the taxation of overtime pay. The change to the original 2023 law means overtime pay is exempt from the State’s income tax. This new amendment now focuses on overtime pay that is in accordance with the Fair Labor Standards Act also known as the F-L-S-A. Josh Harrison is with the labor law firm Ogletree Deacon in Birmingham. He says workers will benefit from the change in state law…
“And so there was ambiguity in the law as to whether or not that overtime pay would be exempt or not,” said Harrison. “And so the amendment clarifies that if it's overtime under the FLSA, then it would be exempt from taxes under the Alabama state law.”
This new amendment allows for any overtime pay that is in accordance with the Fair Labor Standards Act, to be exempt from Alabama’s income tax. Josh Harrison says there will be benefits for workers who are earning overtime pay…
“Well, the the workers who are receiving overtime pay would not have to pay taxes on those on those overtime payments, so they would be the ones that are that are benefiting from the exemption.
Alabama is the first state to pass both a law and amendment addressing the tax on overtime pay. Unless State lawmakers take action, the tax exemption will reportedly be short lived. The current legislation is set to expire in June of 2025.
