Model Legislation

State of Alabama – HB 217 : Exempting Overtime Pay from State Income Taxes | Rep. Anthony Daniels (AL)
Back to Model Legislation
Committee of Jurisdiction: Labor and Workforce Development (LWD)


Alabama is leading the way in implementing progressive policies that enhance workforce participation, grow our economy, and help hard-working families hold onto more of their hard-earned income.

A new law, passed this year with strong bipartisan support, exempts from income taxation any hours worked beyond 40 hours/week, by hourly waged-paid employees.

Exempting the 5% state income tax on the time-and-a-half pay helps:

Families who are working to manage rising consumer costs.

Businesses that are struggling to fill jobs and meet labor shortages.

Local economies that will realize more revenue from increased local spending.

The measure empowers workers to pursue overtime as an avenue to advancement and economic prosperity. It also helps employers and small businesses utilize the potential of overtime hours as a resource to counter lost productivity and attract and retain workers who may be looking for employment out of state.

The law also includes all sectors and businesses. It benefits agricultural workers, law enforcement, service industries, and workers in other industries all the same.

Furthermore, it does not require employees to work overtime hours if they choose not to, nor does it alter the implementation of the Fair Labor Standards Act, or change who is a full-time employee or a part-time employee.

The exemption takes effect in 2024.

Introduced by House Minority Leader Anthony Daniels as House Bill 217 of the 2023 Regular Session, the bill was unanimously passed by the House (105-0) and Senate (34-0).

State Action


NBCSL Member Sponsor(s):
  • Rep. Anthony Daniels (AL)

Summary: State of Alabama - HB 217: Exempting Overtime Pay from State Income Taxes
View/Download Bill open_in_new