Alabama Overtime Pay Exemption for withholding tax

Beginning Jan 1, 2024, overtime pay received by a full-time hourly employee for hours worked above 40 in a given week is excluded from gross income, and is therefore exempt from Alabama state income tax.

Tied with this exemption are employer reporting requirements to the AL Department of Revenue (DOR). Employers are required to:

While Gusto will handle this for 2024 and beyond, you'll need to submit a one-time report with historical 2023 overtime data by Jan 31, 2024 (outside of Gusto)—we'll walk you through how to do this below. 

You can find additional information about the Overtime Exemption here. For any questions about the tax or the requirements, email the AL DOR at [email protected].

Action required by Jan 31, 2024—submit your Report of Historical 2023 Overtime Data directly to the agency

You must submit your one-time “Report of Historical 2023 Overtime Data” directly to the AL DOR by Jan 31, 2024. You'll need to wait until the agency has received your 2023 end-of-year forms before submitting this report—Gusto expects our end-of-year filings to be received by the agency on Jan 17.

A few reminders:

You can run two reports in Gusto that’ll fulfill the 2023 Overtime Data report requirement, learn how to run each below.