The Alabama homestead exemption removes state property tax on your primary residence and, depending on your age, disability status, and income, can reduce or entirely eliminate the county and school district property taxes you owe as well. The rules sit in Alabama Code Sections 40-9-19 and 40-9-21, and the Alabama Department of Revenue sorts homeowners into four tiers labeled H-1 through H-4. Which tier you land in decides how much you save.
Who Qualifies
The property has to be your primary residence, meaning the home where you actually live. A vacation house or a rental you own does not qualify. Only one person or head of household can claim the exemption on a given property, and spouses who each own a separate home cannot both claim.
For homeowners under 65 without a qualifying disability, the exemption is capped at $4,000 in assessed value and 160 acres of land. Those caps loosen or disappear for older residents and people with permanent disabilities.
The Four Tiers and What Each Saves
You qualify for one tier based on your circumstances. The tiers do not stack.
H-1: Under 65, Not Disabled
If you are under 65 and not disabled, H-1 exempts the state portion of property tax on up to $4,000 in assessed value, capped at 160 acres. You also get a county exemption of up to $2,000 in assessed value, though school district taxes are still collected on that portion. There is no income test.
Alabama’s statewide millage rate is 6.5 mills, so on $4,000 of assessed value the state savings runs about $26 per year. A county commission can raise the county-side cap to $4,000 in assessed value by resolution, and some have done so.
H-2: Age 65+ With Alabama AGI Under $12,000, or Permanently Disabled
H-2 covers two groups: residents 65 or older whose most recent Alabama state income tax return shows adjusted gross income below $12,000, and residents of any age who are permanently and totally disabled and retired because of the disability. Permanent blindness also qualifies.
H-2 exempts you from all state property taxes with no assessed value cap, and gives you up to $5,000 in assessed value exemption on the county portion, school district taxes included. The 160-acre land limit still applies.
H-3: Full Exemption From All Property Taxes
H-3 is the most valuable tier. It applies to seniors 65 or older whose combined federal income tax return shows net taxable income of $12,000 or less, and to residents of any age who are permanently and totally disabled regardless of income. H-3 wipes out all ad valorem taxes, with no cap on assessed value and no school district taxes collected. The only limit is 160 acres.
The income test here uses federal taxable income, not Alabama adjusted gross income, and those are different numbers. If you and your spouse file jointly and your combined federal taxable income is above $12,000, you drop to H-2 or H-4. A disabled applicant claiming H-3 needs a physician’s affidavit verifying permanent and total disability.
H-4: Age 65+ With Income Above $12,000
If you are 65 or older but your income exceeds $12,000, H-4 still gives you full exemption from the state portion of property tax with no assessed value cap. On the county side, you get the standard homestead exemption of up to $2,000 in assessed value, and school district taxes are collected. The $12,000 threshold here is measured from your most recent Alabama income tax return.
The practical gap between H-4 and H-1 is that H-4 removes the $4,000 assessed value cap on the state exemption, which matters when your home’s assessed value climbs above that.
How to Apply
Applications go through your local county tax assessor’s office. Alabama does not have a statewide online portal, though some counties offer online filing. You claim the exemption when your property is assessed, and the filing deadline is generally December 31 for properties acquired during the prior fiscal year, which runs October 1 through September 30.
Everyone should bring a valid photo ID and proof of ownership, such as a recorded deed. For H-2 and H-3, bring your most recent state or federal income tax return showing income below $12,000. Handwritten returns are not accepted. For a disability-based claim, bring a physician’s affidavit verifying permanent and total disability.
Once granted, the basic H-1 exemption typically stays in place without annual renewal as long as you keep living in the home. Some counties require periodic renewal for the over-65 and disability tiers, so ask your local assessor whether you need to re-file.
County-Level Variation
Alabama lets counties and municipalities expand the homestead exemption beyond the state minimum. A county commission or city council can pass a resolution raising the county-level exemption for under-65 homeowners from $2,000 up to $4,000 in assessed value. Some of these local adjustments also require approval from the local school board so the change does not destabilize school funding.
Counties also set their own millage rates on top of the state’s 6.5 mills, and those local rates vary widely. Two homeowners with identical assessed values can save very different dollar amounts depending on where they live.
Property Held in a Trust
If your home is titled to a revocable living trust, you may lose the homestead exemption. Alabama’s exemption is tied to individual ownership, and transferring title to a trust creates a separate legal entity as the owner. The Alabama Cooperative Extension System has noted that homeowners who want to qualify for the exemption should hold the house individually rather than placing it in a trust. If you are considering an estate plan that moves your home into a trust, talk to an Alabama attorney about whether the exemption survives the transfer before you file anything.
Rental or Business Use
Alabama does not allow partial homestead exemptions. If you rent out part of your primary residence or use a portion of the property for business, you risk losing the exemption entirely rather than getting a prorated benefit. The home has to function as your personal residence. A fully rented property does not qualify at all. If you are thinking about taking on a tenant or running a business from home, check with your county assessor first about what it will do to your exemption.
If Your Home Is Damaged by a Disaster
If a tornado, hurricane, or other natural disaster damages your home, the exemption stays intact while you repair. Section 40-9-19(f) provides that no homestead exemption under Section 40-9-19 or Section 40-9-21 is affected during any period the homestead is being repaired after disaster damage. You do not need to reapply or file anything extra to keep the exemption running during reconstruction. Without that provision, a homeowner whose house was destroyed could lose the exemption for being unable to occupy the property, adding a tax increase on top of already heavy repair costs.