Starting Monday, the overtime pay of hourly workers in Alabama won’t be taxed by the state.

House Bill 217 by House Minority Leader Anthony Daniels (D-Huntsville) eliminated state income taxes on all overtime pay for Alabama hourly workers by excluding overtime, or any hours worked above 40 hours per week, from the state definition of gross pay.

The legislation was passed with broad Republican and Democrat support during the 2023 session.

The law has a sunset date of June 30, 2025. The legislature would have to approve extending the program before June 30, 2025, for the program to continue beyond that date.

Most income in Alabama is subject to a 5% state income tax rate.

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