To file Alabama Form 40NR, report your total income from all sources in one column and your Alabama-sourced income in another, prorate your deductions and exemptions by the ratio between them, apply Alabama’s graduated rates, and submit the return with a copy of your federal Form 1040 by April 15. Alabama taxes non-residents only on income tied to the state, but the proration formula scales your write-offs to match, so the mechanics matter as much as the numbers.
Do You Actually Need to File 40NR
You’re a non-resident for Alabama purposes if, for the entire tax year, you weren’t domiciled in Alabama, didn’t maintain a permanent home there, and didn’t spend more than seven months inside the state.1Alabama Legislature. Alabama Code 40-18-2 – Levied; Persons and Subjects Taxable If any of those apply, you file the resident Form 40 instead.
The filing trigger for non-residents is any taxable income from property owned or business conducted in Alabama.2Cornell Law Institute. Alabama Administrative Code 810-3-2-.01 The only carve-out is when your Alabama gross income falls below your prorated exemption, which depends on how much of your total income the state can reach. In practice, most non-residents with meaningful Alabama earnings will owe a return.
One boundary worth knowing up front: Alabama has no reciprocal agreements with any other state. Living in a neighboring state doesn’t excuse you from filing.
What Alabama Can Tax
Four categories of income are Alabama-sourced for a non-resident:
- Wages and salaries for work you physically performed in Alabama, even on a short assignment or for an out-of-state employer.
- Profits from a trade, profession, or business operated in the state, including your share of partnership or S corporation income from Alabama operations.
- Rents from real property located in Alabama.
- Capital gains from selling Alabama land or buildings.
Interest, dividends, and wages earned entirely outside Alabama stay out of the Alabama column. They still show up on the return, just not on the side that gets taxed.
What to Gather Before You Start
Form 40NR pulls extensively from your federal return, so finish Federal Form 1040 first.3Alabama Department of Revenue. Alabama Form 40NR Instructions You’ll also want:
- W-2s showing Alabama wages, or showing total wages if any of the work was performed in Alabama.
- 1099s and K-1s for rental income, business income, or partnership and S corporation distributions tied to Alabama activity.
- Records of any Alabama property sale: closing statement, basis documentation, and any 1099-S.
- A copy of your completed Federal Form 1040, which Alabama requires you to submit with 40NR.
Filling In the Two Columns
The income section of Form 40NR runs in two columns. Column B is your total income from all sources, matching the corresponding lines on your federal return. Column C is only the portion sourced to Alabama.
If you earned $80,000 in total wages and $20,000 of that came from work performed in Alabama, Column B gets $80,000 and Column C gets $20,000. Out-of-state bank interest of $5,000 goes in Column B with a zero across in Column C. Every income line works the same way.
After the applicable adjustments, each column produces an Adjusted Total Income figure. Divide Column C by Column B to get the Alabama percentage. That percentage drives everything that follows.
Prorating Your Deductions and Exemptions
Non-residents don’t get the full value of Alabama deductions and exemptions. Each is multiplied by the Alabama percentage from the previous step.
Standard or Itemized Deduction
Alabama’s standard deduction shrinks as income rises. For married couples filing jointly, it ranges from $8,500 at lower incomes down to $5,000 once AGI exceeds $35,500. For single filers, it goes from $4,250 down to $2,500 once AGI crosses $17,750. Whichever amount you qualify for gets multiplied by the Alabama percentage. If you itemize, the same proration applies to your itemized total.
Personal Exemption
The personal exemption is $1,500 for single filers and married filing separately, and $3,000 for married filing jointly and head of family.4Alabama Department of Revenue. What Personal Exemptions Am I Entitled To? Multiply by the Alabama percentage before subtracting from income.
Federal Income Tax Deduction
Alabama lets you deduct the federal income tax you paid, which is unusual. For non-residents, this deduction is prorated using the Alabama percentage of adjusted total income.5Alabama Department of Revenue. Alabama Administrative Code 810-3-15-.21 – Deductions for Nonresidents It can meaningfully cut your Alabama taxable income, so don’t skip it.
Applying the Tax Rates
Subtract your prorated deductions and exemptions from Alabama adjusted gross income to get Alabama taxable income. The rates are:6Alabama Department of Revenue. What Is Alabama’s Individual Income Tax Rate?
- 2% on the first $500 of taxable income ($1,000 for married filing jointly).
- 4% on the next $2,500 ($5,000 for married filing jointly).
- 5% on everything above $3,000 ($6,000 for married filing jointly).
The brackets are narrow enough that most non-residents with any real Alabama income will hit the 5% rate quickly.
Deadlines and the Automatic Extension
Form 40NR is due April 15 following the close of the tax year. If April 15 falls on a weekend or holiday, the due date moves to the next business day.7Alabama Department of Revenue. When Should I File My Alabama Individual Income Tax Return?
Alabama grants an automatic six-month extension to October 15 with no form required.7Alabama Department of Revenue. When Should I File My Alabama Individual Income Tax Return? The extension covers the return only. Any tax you owe is still due April 15, and unpaid balances accrue interest and penalties even if you file within the extension window.
Submitting the Return and Paying
You can file Form 40NR electronically through the My Alabama Taxes (MAT) portal or approved third-party tax software.8Alabama Department of Revenue. Individual Income Tax Electronic Filing Options If you file on paper, mail the return with a copy of your Federal Form 1040 to:
Alabama Department of Revenue
P.O. Box 327469
Montgomery, AL 36132-74699Alabama Department of Revenue. What Is the Address for Mailing My Return?
Payments can go through MAT by ACH debit or credit card. If you pay by check or money order, include Form 40V (the payment voucher) and mail it to the payment address printed on the voucher, which differs from the return address.10Alabama Department of Revenue. Form 40V Skip the 40V if you already paid electronically.
Handling Double Taxation With Your Home State
If your home state also taxes the same income, the credit that resolves the overlap is claimed on the home-state return, not on 40NR. Alabama’s Credit for Taxes Paid to Other States (Schedule CR) is available only to residents filing Form 40.11Alabama Department of Revenue. Schedule OC Instructions – Section: Part A Credit for Taxes Paid to Other States As a 40NR filer, you pay Alabama what you owe and then claim the credit on your home-state return. Most states with an income tax offer this credit. Check your home state’s instructions for the form and documentation; a copy of your completed Form 40NR is usually required.
Estimated Payments and Penalties
If you expect to owe Alabama $500 or more for the coming tax year after withholding and credits, you’re generally required to make quarterly estimated payments.12Justia Law. Alabama Code 40-18-83 This catches many non-residents with Alabama rental or business income that has no withholding attached. Underpayment can trigger a penalty on the final return even if you pay the balance in full at filing.
Late payment carries a penalty of 1% of the unpaid tax per month or partial month, capped at 25%.13Cornell Law Institute. Alabama Administrative Code 810-14-1-.30 – Penalty for Failure to Timely Pay Tax Interest also runs from the original due date. If ALDOR sends a demand notice and you don’t respond within 30 days, the same 1%-per-month structure applies to the amount in the notice. Paying your best estimate by April 15 and using the automatic extension only for the paperwork is the cleanest way to keep exposure down.