There isn't anything particularly unique about conducting a 1031 exchange in Alabama compared to other states in the U.S. The rules and processes for a 1031 exchange, as outlined in Section 1031 of the Internal Revenue Code, apply uniformly across all 50 states. This means that the fundamental requirements, such as the need for the properties involved to be held for investment or used in a trade or business, and the like-kind nature of the exchanged properties, remain consistent whether the exchange involves properties in Alabama or elsewhere in the country.
Alabama allows taxpayers to deduct federal income taxes from their state taxable income. The Combined Rate accounts for Federal, State and Local tax rates on capital gains income, the 3.8 percent Surtax on capital gains and the marginal effect of Pease Limitations (which results in a tax rate increase of 1.18 percent).
For single taxpayers with AGI below $23,000, the standard deduction is $2,500. This standard deduction amount is reduced by $25 for every additional $500 of AGI, not to fall below $2,000. For Married Filing Joint taxpayers with AGI below $23,000, the standard deduction is $7,500. This standard deduction amount is reduced by $175 for every additional $500, not to fall below $4,000. For all taxpayers claiming a dependent with AGI of $20,000 or less, the dependent exemption is $1,000. This amount is reduced to $500 per dependent for taxpayers with AGI above $20,000 and equal to or less than $100,000. For taxpayers with over $100,000 AGI, the dependent exemption is $300 per dependent. Alabama allows taxpayers a deduction for total federal tax liability from their federal return less any federal tax credits claimed.
