Alabama State Overtime Exemption

Overtime wages will be exempt from Alabama State Income Tax Wages and Taxes from 1/1/2024 through 6/30/2025.


Effective 1 January 2024 through 30 June 2025, overtime wages will not be taxable for the Alabama state tax. This is for any wages earned in Alabama over 40 hours a week for an hourly employee.

Visit the Alabama Overtime Pay Exemption Reporting site for details.

How it Works

To support this new regulation, we have added a new earning code option that is available to add to your company, named Alabama Overtime. Any wages assigned to this earning code will be exempt from the Alabama State Income Tax calculations. These wages will still be reported on the W2 and used in other state income tax calculations.

Review your earning codes in the system under Settings > Payroll Setup > Earning Codes. The type should show up as Alabama Overtime.

Any new earning codes may also need special mapping for Timesheets and General Ledger settings.

Please contact for additional details or assistance in setting up these new earning codes.