For the tax year beginning on or after January 1, 2024, overtime pay received by a full-time hourly wage paid employee for hours worked above 40 in any given week are excluded from gross income and therefore exempt from Alabama state income tax. Tied with this exemption are employer reporting requirements to the Alabama Department of Revenue (ALDOR). Employers are required to report the total aggregate amount of overtime paid and the total number of employees who received overtime pay.
Employers are required to report to ALDOR in two ways:
- A one-time report due by January 31, 2024, which includes the aggregate amount of overtime paid during 2023 along with the number of full-time hourly employees who received the pay.
- A monthly/quarterly report of the same data requirement beginning with the 2024 tax year tied to the employer’s reporting of withholding tax.
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