Cheapest of the major southern retirement states. Social Security, government pensions, and most defined-benefit pensions fully exempt — plus rock-bottom property taxes.
| State income tax | Progressive, top rate 5% |
| Social Security | Fully exempt |
| Pensions & 401k/IRA | Most defined-benefit pensions fully exempt; first $6K of IRA/401k withdrawals exempt at 65+ |
| Avg combined sales tax | 9.29% |
| Estate / inheritance tax | None |
Effective property tax: 0.40% (ranked #2 of 50 states).
Homestead exemption + age 65+ full state property tax exemption on principal residence
Cost of living index: 88.1 where the US average is 100 — about 12% cheaper than the national average.
Hot humid summers, mild winters. Gulf Coast (Mobile, Gulf Shores) has Florida-like climate.
Mixed — strong in Birmingham (UAB), weaker in many smaller cities. Best to retire near a major medical center.
Fairhope, Huntsville, Auburn
No, Alabama does not tax Social Security retirement benefits.
Progressive, top rate 5%. Defined-benefit pensions + SS exempt; partial exemption for IRA/401k at 65+.
Alabama's cost of living index is 88.1 where the US average is 100. Effective property tax averages 0.40% and combined sales tax averages 9.29%.
Popular retirement spots in Alabama include Fairhope, Huntsville, Auburn.
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Tax data current as of 2026 publication. Rates and rules change annually — verify with a CPA before relocating. This page is educational and not personalized tax or legal advice.