Dale County Chronicle
MONTGOMERY — Kay Ivey on Thursday signed House Bill 527 into law, establishing a new income tax deduction for certain overtime earnings and temporarily suspending the state’s portion of the grocery tax.
The legislation, sponsored by James Lomax and carried in the Senate by Arthur Orr, allows qualifying taxpayers to deduct up to $1,000 in overtime compensation from their state income taxes. The deduction will apply to tax years 2026 through 2028.
In addition to the income tax provision, the law pauses Alabama’s state grocery tax for two months, from May 1 through June 30, 2026.
In a statement, Ivey said the measure is intended to provide financial relief to working residents.
“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 can put a two-month pause on the state’s portion of the grocery tax to help families across Alabama.”
Lomax described the legislation as a way to deliver direct savings to households while recognizing additional work hours.
“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,” Lomax said.
Orr echoed similar sentiments, noting the bill’s potential economic impact.
“This reflects a strong commitment to easing the financial burden on Alabama families while encouraging productivity and economic growth,” Orr said.
The grocery tax suspension applies only to the state’s portion of the tax. Local grocery taxes, which vary by municipality, are not affected by the new law.
House Bill 527 takes effect immediately, with the grocery tax suspension beginning May 1 and ending June 30, 2026.
