Alabama taxpayers won’t have to pay more in state income tax because of the increased federal child tax credits they received last year.
Gov. Kay Ivey signed into law a bill to shield the benefits that most families with children got under the American Rescue Plan Act , passed by Congress in March 2021, from the state income tax.
In Alabama, without a change in state law, the federal benefits would lower the deduction for federal taxes paid that Alabama taxpayers use to reduce their state income tax. “I am proud to sign this needed tax relief into law so that money will return directly into the hands of hardworking Alabamians,” Ivey said in a press release. “I commend the Alabama Legislature for their work on this and look forward to this benefitting Alabama families this tax season.”The Alabama Department of Revenue issued instructions for how those taxpayers can take advantage of the new law.