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In The Yellowhammer State, valuation and assessment of all property tax is overseen by the Property Tax Division of the Alabama Department of Revenue. Property tax law in Alabama divides and assesses real estate into four distinct classes, and each has its own assessment percentage.
- Class 1 – utilities; assessed at 30%
- Class 2 – all other property; assessed at 20%
- Class 3 – family and owner-occupied residential properties; agricultural and forest (timber) property; and historic buildings and sites; assessed at 10%
- Class 4 – automobiles; assessed at 15%
Each county and city applies a certain millage rate (number of dollars paid per $1,000 of assessed value) based on various operations such as schools, libraries, and police service. Property taxes are calculated by multiplying the appropriate millage rate by assessed value of the property, minus any exemptions. So, for example, property with a fair market value of $200,000 ($200,000 multiplied by 20%, or .20) would have an assessed value of $40,000. Then, the combined state and local millage rate would be applied to arrive at how much you would owe in property tax.
To benefit from reduced tax rates, you can apply for a homestead exemption, of which there are four types:
- Exemption 1 – As long as you own and live in a single family residence and use the property for no other purposes, you can quality for a regular homestead exemption. Amount of the exemption is $4,000 of the assessed value for state and $2,000 for county
- Exemption 2 – This is for people over age 65 or those permanently and totally disabled (including the blind) with an adjusted gross income less than $12,000. This applies to all state taxes and up to $5,000 assessed value for county.
- Exemption 3 – For people over 65 years of age and totally disabled. All property taxes are exempt if taxable income (on their Federal Income Tax) is less than $7,500.
- Exemption 4 – This is for people over 65, irrespective of income. Here, you can be exempt from total state taxes and up to $2,000 assessed value for the county.
To prove your disability, you must supply statements from different sources such as doctors, physicians, Veterans Administrations, and retirement letters. You must apply for exemptions by December 31 of each year.
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