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Alabama’s new tax exemption law officially went into effect on Jan. 1.

The Alabama Overtime Tax Exemption Law removes income tax on overtime pay received by full-time hourly wage paid employees who for hours worked above 40 hours in any given week. Employers are required to report the total aggregate amount of overtime paid and the total number employees who received overtime pay.

Previously full-time hourly wage paid employees were taxed 5 percent on any time worked past the regular 40 hours, but now Alabamians will receive that full amount instead. This legislation was introduced last year by House minority leader Anthony Daniels – who is running for office in Pike County’s district in 2024.

“This gives working people an opportunity to take home more money so they can provide for their families,” Daniels previously said. “With where we are with the economy, putting more money in the pockets of Alabamians and Americans in general, is something we need to focus our attention on.”

This law will sunset – or expire – in 2025 unless state lawmakers decide to renew it.