Governor Kay Ivey signed legislation into law on Thursday for a $1,000 overtime tax deduction and a temporary suspension of the state’s 2% tax on groceries.
The legislation, sponsored by State Rep. James Lomax (R-Huntsville) and State Sen. Arthur Orr (R-Decatur), provides an income tax deduction for qualified overtime compensation, up to $1,000.
An uncapped overtime tax cut sponsored by House Minority Leader (D-Huntsville) was passed into law in the 2023 session but the state’s Republican supermajority let it expire in June 2025.
HB527 also suspends the state’s portion of the grocery tax for two months beginning in May.
“Alabamians are the best workers out there. I applaud Rep. James Lomax and Sen. Arthur Orr for working with us to provide tax relief to those employees putting in overtime,” Ivey said. “I am also glad we are able to put a two month pause on the state’s portion of the grocery tax to help families across Alabama. Any time we can responsibly provide some relief for the hardworking people in our state, I am all for it.”
Lomax joined Ivey in her office as she officially signed HB527 into law.
“HB527 provides meaningful, direct tax relief by delivering real savings at the grocery store for all families and rewarding hardworking Alabamians by recognizing the value of overtime work,” Lomax said. “By creating a deduction on overtime pay and temporarily suspending the state sales tax on food, this legislation puts money back into the pockets of families when they need it most. I’m grateful to my colleagues in the Legislature for their support in getting this bill across the finish line, and I thank Governor Ivey for her continued leadership in supporting the people of Alabama.”
Orr carried the legislation in the Senate.
“I want to commend my colleagues in the Legislature for passing legislation that provides hardworking Alabamians with well-deserved tax relief on overtime pay, as well as some temporary tax relief at the grocery store that will benefit families across the state,” Orr said. “This reflects a strong commitment to easing the financial burden on Alabama families while encouraging productivity and economic growth, which are priorities Governor Ivey has emphasized since day one.”
The income tax reduction for overtime compensation will apply for tax years 2026 through 2028. The grocery tax suspension will start May 1 and end June 30.
To connect with the author of this story or to comment, email [email protected].
Don't miss out! Subscribe to our newsletter and get our top stories every weekday morning.
