Alabama nonresident employee tax exemption conditions detailing two key rules using text and circular icons. Work duration: Work in the state for 30 or fewer days. Tax exemption: Exempts compensation paid to nonresident employees from state and local income tax and withholding.
Contributed by: MatthewD, FreeTaxUSA Agent, Tax Pro
Effective January 1, 2026, Alabama House Bill 379 exempts nonresident business travelers from state and local income tax when they work in Alabama for 30 or fewer days and fully exempts disaster-relief workers. Signed into law May 15, 2025, by Governor Kay Ivey, the law makes compliance easier for temporary employees and employers who meet certain requirements, such as working in multiple states or living in a state with a similar exclusion.
Alabama exempts income paid to nonresident employees from state and local income tax and withholding tax when they work in the state for 30 or fewer days and meet the following conditions:
- The employee performs employment duties in Alabama and at least one other state during the calendar year.
- The employee isn't a professional athlete, professional entertainer, or public figure.
- The employee’s state of residence either provides a similar exemption, does not impose an individual income tax, or provides a federal or constitutional tax exemption.
To use this exemption, employers track employees’ daily time and location or rely on employees’ annual location reports to avoid penalties. Once a worker exceeds the 30-day limit, all Alabama-sourced compensation for that calendar year becomes taxable, so careful tracking is essential.
This new law gives much needed tax relief to nonresident employees working in Alabama for short periods of time.
For more information, please refer to the official Alabama Legislature website for the full text of House Bill 379.
Your employer withheld Alabama taxes anyway
If you qualify for the 30-day rule exemption, but your Alabama employer withheld state taxes in error, there are three things you should be aware of:
- No tax liability: Because you qualify for the exemption, you don’t owe Alabama state or local income tax on those earnings.
- Request a refund: To get your money back, file a nonresident Alabama tax return to report zero taxable Alabama income and claim a refund for the payroll tax your employer incorrectly withheld.
- Employer correction: Ask your employer's payroll department to stop withholding Alabama state tax.