Alabama residents enjoy a unique estate planning advantage—but it wasn’t always this way. Alabama is one of several states that does not collect a separate estate tax (or inheritance tax). But that hasn’t always been the case. Understanding the history behind this—and what it means for your estate plan—can help you make smarter decisions about your assets.
For decades, Alabama followed the “pick-up tax” system. Under this system, the state estate tax was directly tied to the federal estate tax credit for state taxes paid. Essentially, the state piggybacked on federal rules—when someone paid a federal estate tax, part of it redirected to the state.
This changed in 2005 when the federal government phased out the state death tax credit and replaced it with a deduction. Since Alabama’s tax was linked to that now-defunct credit, it effectively repealed itself. The state never enacted a new stand-alone estate tax, and there’s been no serious legislative movement to bring one back.
What No Estate Tax in Alabama Means for Residents
If you live in Alabama, your estate may still be subject to the federal estate tax, but that only applies to estates exceeding the federal exemption (which is very high—over $13 million in 2025). For most people, this means no estate taxes at all.
Still, the state does have other taxes that could impact an estate, such as income taxes on certain inherited assets and real estate taxes. And just because it doesn’t tax your estate doesn’t mean another state won’t if you own property there.
Frequently Asked Questions
- Is there an estate tax in Alabama?
- No. Alabama does not have a state-level estate tax or inheritance tax.
- When did the state eliminate its estate tax?
- Technically, it ended in 2005 when the federal government phased out the state death tax credit.
- Could Alabama bring it back?
- It’s possible, but unlikely unless there are significant changes to state revenue needs or federal law.
- Do I still need to plan for taxes?
- Maybe. Federal estate tax, capital gains tax, and other tax implications can still apply, especially for high-value estates or multi-state property ownership.
(Learn More: Read about revocable trusts in Delaware versus Nevada.)
