Alabama veteran taxes

Military retired pay in Alabama

Exempttax year 2025Sources 1, 2

Alabama does not tax military retirement pay. The Department of Revenue’s 2025 Form 40 booklet lists Military Retirement Pay among retirement systems whose payments are not taxable and are not reported, with no age, cap or income test.

Survivor Benefit Plan annuities

ExemptSources 3, 4

The Alabama Department of Veterans Affairs states that military retirement benefits and survivor benefits derived from them are exempt from any state, county or municipal income tax (Ala. Code § 40-18-20). The Department of Revenue’s booklet does not name the Survivor Benefit Plan but says an annuity exempt to the former employee is also exempt to the beneficiary.

Property tax relief for disabled veterans

Exemption or creditSources 5, 6, 7

Alabama exempts from all ad valorem taxes the homestead, up to 160 acres, of an owner who is permanently and totally disabled, with no income limit; this rule is not limited to veterans. Veterans who claim it because of a service-connected disability are exempt from the annual recertification requirement (Ala. Acts 2026-598, effective October 1, 2026). Separately, a home acquired with a federal specially adapted housing grant is exempt regardless of its value (Ala. Code § 40-9-20).

• Permanent and total disability homestead (type H-3): exempt from all ad valorem taxes, no income limitation, not more than 160 acres; the Department of Revenue refers to a physician’s affidavit to verify the disability and sets no VA rating threshold.
• Specially adapted housing home (Ala. Code § 40-9-20): exempt regardless of value while owned and occupied as a home by the veteran or the unremarried widow or widower.
• Applications go to the local county office.

Vehicle registration for disabled veterans

Fee waiver or discountSources 8, 9

Alabama exempts the first license plate of a resident veteran with a service-connected disability rated 10% to 50% from registration fees and license plate issuance fees. Veterans rated 51% or higher, or whose vehicle has special mechanical control devices, get the first plate free of those fees and pay a $5 annual fee for each additional plate. Ad valorem taxes still apply, except for a vehicle all or partly paid for by the U.S. Department of Veterans Affairs (Ala. Code § 40-12-254).

• Plate: Disabled Veteran distinctive plate; Ala. Code §§ 40-12-244, 40-12-254, 32-6-130.
• The fee exemption or reduction does not require the Disabled Veteran plate.
• A surviving spouse may not obtain or retain the plate.