HB389 Summary

• Amends Alabama Code Sections 40-18-15 and 40-18-19 to increase the optional standard deduction and expand adjusted gross income thresholds for maximum deductions and dependent exemptions.

• For tax years beginning after December 31, 2025, increases the optional standard deduction for married taxpayers filing jointly from $8,500 to $9,500 and raises the adjusted gross income threshold from $25,500 to $28,000 before reductions apply.

• For single taxpayers beginning after December 31, 2025, increases the standard deduction from $3,000 to $3,500 with adjusted gross income threshold raised from $25,500 to $28,000.

• Expands dependent exemption income thresholds beginning after December 31, 2025, allowing full $1,000 exemption for dependents up to $60,000 adjusted gross income (increased from $50,000) and $500 exemption up to $120,000 (increased from $100,000).

• The act becomes effective on October 1, 2025.