MAT is an online filing system developed to allow taxpayers to file and pay their withholding tax electronically. FORM ALABAMA DEPARTMENT OF REVENUE A-4 Employee's Withholding Exemption Certificate REV. The theory is that the individual earned the benefits (tax-free) while he or she was working in Alabama, and thus the benefits should be taxable by Alabama, regardless of where the taxpayer resides when the payments are received. Also, the amount of the exempt severance payments should not be included in Alabama taxable wages (box 16) of the employee W-2 form, but should be disclosed in box 14 (Other) of the W-2 as exempt severance payments. Alabama collects a state income tax, with rates of 2%, 4% and 5%. HOME ADDRESS CITY STATE ZIP CODE If you had no Alabama income tax liability last year and you anticipate no Alabama income tax liability this year, you may claim ''exempt'' from Alabama withholding tax. For lower-income residents, that tax hit can be painful, since the state … They were already exempt … Generally, the Alabama state tax rate on income is 2 percent on the first $500 of income, 4 percent on the next $3,000 and 5 percent of all income … The Alabama Department of Revenue offers a FREE electronic service, My Alabama Taxes (MAT), for filing and remitting withholding tax. In addition to a state sales tax, counties and cities are allowed to collect taxes on purchases made in their jurisdictions. The good news is that if you are age sixty-five or older you are exempt from paying state property taxes. Fax the approval letter to (334) 242-0112. The rates are 2%, 4% and 5%, and your marginal tax rate will depend on your income and filing status. The top rate can’t go above 5% because of the limit imposed by the state Constitution. Here's an excerpt taken directly from the State of Alabama web site: I AM OVER 65. File Schedules 3 & 4 to itemize your tax exemptions, and additional taxes paid. You won’t have to worry about rising income tax rates in Alabama. Alabama income tax must not be withheld when exempt severance payments are made. Military income: Up to $15,000 of military basic pay received during the taxable year may be exempted from Virginia income tax. If you live in Alabama, you pay a state income tax in addition to filing your federal income taxes. The Alabama dependent exemption amount increased significantly for some taxpayers beginning in 2007, as a result of a tax reform measure passed by the Legislature in 2006. Gov. Alabama's income tax brackets were last changed twelve years ago for tax year 2008, and the tax rates have not been changed since at least 2001.. Alabama has three marginal tax brackets, ranging from 2% (the lowest Alabama tax bracket) to 5% (the highest Alabama tax bracket). Learn how filing status affects your tax bill Alabama income tax rates. 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