Alabama’s Department of Revenue will start issuing the special rebate checks next month. About 1.9 million residents are expected to receive special rebate checks from Alabama. Eligible single filers will get $150, while couples filing jointly can get $300.
Special rebate checks from Alabama: who will get them?
On June 1, Gov. Kay Ivey signed the state budget, which included a one-time tax rebate of up to $300. The special rebate checks from Alabama are estimated to cost the state about $393 million, and it will be funded by a $2.8 billion surplus in the Education Trust Fund.
Lawmakers passed the rebate plan on May 25, to offset grocery taxes residents paid throughout the year. Alabama has now reduced its grocery tax to 3%, which went into effect last month.
Initially, Gov. Ivey wanted to send $400 to single filers and $800 to those filing jointly. However, the proposed rebate amount underwent a couple of alterations before the Senate and House agreed on the final rebate amount of $150 for single filers ($300 for couples filing jointly).
“Thanks to the work of the Alabama Legislature, we continue making these wise investments while paying down debts, adding to our savings and returning the working people of Alabama’s money back to them through tax rebates,” Gov. Ivey said at the time of signing the rebate bill.
The Department of Revenue will start issuing the rebate on November 30. Those who get their refunds via direct deposit will get the rebate directly into their bank account. Others will be issued a paper check.
To qualify for the special rebate checks from Alabama, residents must have filed their 2021 state income tax return on or before Oct. 17, 2022. Those who don’t file a return or are claimed as a dependent by someone else on their 2021 return won’t be eligible for the rebate money.
It must be noted that recipients won’t have to pay any income tax on the rebate money, and it won’t be subject to debt collection as well.
Grocery tax reduced, but not much
Separately, Alabama’s grocery tax reduction is now in effect, but this reduction doesn’t reduce the taxes much that residents pay at the grocery store. It is because the legislation reduces the state tax rate by just 1% for 2023, while food items will still be subject to local sales taxes.
Alabama is only one of 13 states that still tax groceries. Prior to September 2023, the grocery tax rate in the state was 4%. Despite the cut in the tax rate, residents still need to pay applicable state and local taxes on groceries, which can be as high as 7.5% in some areas.
Although the state can further reduce its portion of the grocery tax next year, it is not guaranteed. If the state does enact another tax cut, the state grocery tax will drop another 1%, to 2%.
