Governor signs law shielding child, earned income & dependent care tax credits from state income tax

Federal COVID-related child, earned income and dependent care tax credits or advance payments are now shielded from Alabama’s state income tax.

Act No. 2022-37, which the governor signed Wednesday, allows individual taxpayers to calculate their federal income tax deduction without consideration of that federal relief, which was part of the American Rescue Plan Act (ARPA).

The Alabama Revenue Department has created a 2021 Federal Tax Deduction fact page online with information on how to receive this additional tax deduction or how to amend a current return if already filed. Go to:


That fact sheet states that qualified individuals who already filed their 2021 tax returns electronically do not need to file an amended return. Taxpayers who already filed using My Alabama Taxes or by paper should file an amended paper return, the department says.

Rep. Jim Carns, R-Birmingham, and Sen. Dan Roberts, R-Mountain Brook, authored the legislation to provide tax relief for Alabama families, who likely received about $2 billion from the federal American Rescue Plan Act in 2021. Based on that amount, Roberts estimated those families would have owed Alabama $87.7 million in taxes had this legislation not been signed into law.

Last year, the Legislature also eliminated the state income tax on other federal COVID relief benefits, including Paycheck Protection Program loans and stimulus checks for 2020 and 2021.


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Originally posted at 10 a.m. Feb. 23, 2022