Annual Tax-Exempt Shopping Event in Alabama, 2025
Alabama residents are in for some changes in their tax landscape, with two major developments set to take effect from September 1, 2025.
Tax-Free Diapers and Baby Products
Beginning next year, Alabama will temporarily eliminate state sales tax on diapers, baby formula and bottles, pump equipment, baby wipes, maternity clothing, and feminine hygiene products. This exemption will last until August 31, 2028, unless extended by future legislation.
Reduced Grocery Tax Rate
In a move aimed at easing the financial burden on families, the state sales tax on groceries will be lowered from 3% to 2%. This means residents will pay $1 less in tax per $100 spent on eligible grocery items.
This reduction coincides with the discontinuation of the prior Alabama law that exempted income earned from overtime from state taxes, which had a high revenue cost.
Back-to-School Tax Holiday
Prior to these changes, the annual back-to-school Alabama sales tax holiday ran from 12:01 AM on Friday, July 18 until midnight on Sunday, July 20. During this period, many types of school supplies, clothing, books, and electronics were exempt from Alabama's usual 4% sales tax rate. However, it's important to note that this tax exemption will expire on August 31, 2028, unless future legislation extends the provision.
Additional Tax Changes
Other relevant tax changes include enhancements in business-related tax deductions and provisions under the One Big Beautiful Bill Act effective January 1, 2025. These changes include increased SALT deduction caps and permanent qualified business income deductions.
In summary, starting September 1, 2025, Alabamians will benefit from a temporary sales tax exemption on diapers and certain baby-related products and a lower grocery sales tax, reflecting a shift to reduce the tax burden on essential family and food items. These changes aim to ease the financial strain on families and businesses in the state.
[1] One Big Beautiful Bill Act (2025) [2] Alabama Department of Revenue (2025)
- In light of the delivery of numerous tax adjustments, individuals may need to reassess their personal-finance strategies, as Alabama residents will experience reduced personal expenses related to groceries and baby essentials, with the state sales tax on groceries dropping from 3% to 2% and the temporary elimination of state sales tax on diapers, baby formula, bottles, pump equipment, baby wipes, maternity clothing, and feminine hygiene products.
- With the evolution of Alabama's tax landscape, individuals and families who are focused on personal-finance management may find it beneficial to reallocate funds previously spent on taxes towards other essential financial goals, such as savings or investments, as a result of the lowered grocery tax rate and the temporary tax-free period for specific baby-related items.
