How to File LLC Taxes in Alabama (2026)
Your Alabama LLC's state tax form depends on how it's classified. A single-member LLC reports through the owner's personal Alabama return.
A multi-member LLC files Form 65 instead. An LLC electing S-corp treatment files Form 20S, and one electing C-corp treatment files Form 20C. All four routes lead to the Alabama Department of Revenue.
This guide covers each classification's state form and due date, plus Alabama's income tax rate, the Business Privilege Tax exemption for LLCs owing $100 or less and the other state taxes an LLC might owe.
Quick Summary
- Check which form matches your LLC type first. Single-member, multi-member, S-corp and C-corp LLCs each file a different one.
- Confirm this year's Business Privilege Tax exemption before you file. It can reduce what your LLC owes to zero.
- Talk to a CPA before you elect S-corp, C-corp or PTE status. The C-corp election shifts your filing deadline, and the others add new forms.
Alabama LLC Tax Summary
Here's how Alabama taxes each LLC type, the form each one files and where it goes, before we walk through the details below.
| LLC Type | Federal Form | State Form | Filed With | Filing Deadline & Tax Rate |
|---|---|---|---|---|
| Single-member LLC | Schedule C (Form 1040) | None (Form PPT if tax exceeds $100) | Alabama Department of Revenue | Due with your federal return; exempt if $100 or less |
| Multi-member LLC | Form 1065 + Schedule K-1 | Form 65 | Alabama Department of Revenue | March 15 |
| S-Corp election | Form 1120-S | Form 20S | Alabama Department of Revenue | March 15 |
| C-Corp election | Form 1120 | Form 20C | Alabama Department of Revenue | 6.5%; filing due 1 month after the federal deadline |
| Business Privilege Tax (all LLC types) | None | Form PPT | Alabama Department of Revenue | $0.25-$1.75 per $1,000 net worth; exempt if $100 or less |
How Alabama LLCs are taxed
Alabama treats an LLC as a pass-through entity by default. The LLC itself doesn't pay federal income tax, so profit passes straight to the members, who report it on their own returns.
An LLC can change that default treatment with the IRS. Form 8832 elects C-corp status, and Form 2553 elects S-corp status. Alabama then follows whatever classification you've chosen. See how LLC taxes work across classifications before you pick one.
These tax duties begin the moment you start an LLC in Alabama, even before your first profitable year. Staying compliant also means keeping a registered agent in Alabama active.
Alabama state taxes by LLC type
Alabama's state form for your LLC depends on how the IRS classifies it. Here's what each type files and when.
1. Single-member LLC
A single-member LLC is a disregarded entity. It doesn't file a separate state income tax return. The owner reports the LLC's profit on their personal Alabama Form 40 instead. It may still owe the Business Privilege Tax, covered below.
2. Multi-member LLC
A multi-member LLC files Form 65 with the Department of Revenue and issues each member a Schedule K-1. Form 65 is due March 15 for calendar-year LLCs. A managing member or authorized partner signs the return.
3. S-Corp election
Electing S-corp status means filing Form 20S, also due March 15 for calendar-year filers. Form 20S is an informational pass-through return rather than a corporate tax return.
S-corp profit still flows to the shareholders' personal returns. That changes only if the LLC also elects Alabama's pass-through entity tax.
4. C-Corp election
An LLC that elects C-corp status files Form 20C and pays Alabama's 6.5% corporate income tax on net taxable income [1]. The filing deadline falls one month after the federal Form 1120 date, but the tax payment is due on the original date.
5. Alabama income tax rate for tax year 2026
Alabama taxes personal income at graduated rates that top out at 5% [2]. That includes the profit that flows through from an LLC.
The first $500 of taxable income for single filers (or $1,000 for joint filers) is taxed at 2%. The next bracket is taxed at 4%. Everything above $3,000 single ($6,000 joint) is taxed at 5%.
That 5% top rate applies to LLC profit reported on your personal return, whether the LLC is single-member, multi-member or has elected S-corp status. An LLC that elects C-corp status pays Alabama's 6.5% corporate income tax instead, covered above.
Federal taxes Alabama LLC owners pay
Beyond the state paperwork above, LLC owners still owe federal tax on the profit they take out of the business, no matter how the LLC is classified.
1. Federal self-employment tax
Active LLC members pay a 15.3% self-employment tax on their share of profit, covering Social Security and Medicare [3]. You calculate and pay it with Schedule SE on Form 1040.
2. Federal income tax
You also owe standard federal income tax on the profit you take, based on your bracket and filing status. You report it on Form 1040 with the rest of your return.
Quarterly estimated payments are due April 15, June 15, September 15 and January 15 [4]. Those payments kick in once you expect to owe $1,000 or more for the year.
Other Alabama taxes that may apply
A few more Alabama taxes can apply depending on what your LLC does, whether it sells taxable goods and whether it has employees on payroll.
1. Alabama Business Privilege Tax
An LLC's Business Privilege Tax is based on its net worth apportioned to Alabama, ranging from $0.25 to $1.75 per $1,000. An LLC whose computed tax is $100 or less is fully exempt and doesn't need to file [5].
LLCs that owe more than that file Form PPT on the same date as their federal return, through My Alabama Taxes.
This Business Privilege Tax runs separately from the cost of starting an LLC in Alabama, so budget for both alongside your other startup expenses.
2. Employer taxes
If your LLC has employees, you register for unemployment insurance with the Alabama Department of Labor through its eGov online services.
New employers pay 2.70% on the first $8,000 of each employee's wages [6]. You also withhold and remit state income tax from paychecks.
3. Sales and use tax
LLCs that sell taxable goods collect Alabama's 4% state sales tax, plus any local county or city tax, which can add another 0.10% to 5% [7]. Register before you make your first taxable sale.
4. Local and industry taxes
Cities and counties layer their own sales, use, rental and lodging taxes on top of the state rate. Certain industries, including contractors, utilities and lodging providers, owe additional state and local taxes specific to their sector.
Alabama pass-through entity tax (EPT) election
Alabama's Electing Pass-Through Entity Tax lets S-corps and multi-member LLCs pay state tax at the entity level, instead of passing it to owners' personal returns [8]. Owners then get a refundable credit for their share of the tax already paid.
The election has been available since tax years starting on or after January 1, 2021. It helps owners work around the federal cap on state and local tax deductions.
To elect, owners holding more than 50% of the entity's voting control must vote or consent. The electing box then gets checked on a timely filed Form 65 or Form 20S.
Electing entities also file Form EPT, due the 15th day of the third month after the tax year ends (March 15 for calendar-year filers), and pay tax at a 5% rate.
What is deductible for an Alabama LLC
If your LLC elects C-corp status, Alabama lets you deduct the federal income tax you paid when calculating your state corporate income tax base. That's on top of the usual business deductions the IRS allows for wages, rent and other ordinary expenses.
The federal Qualified Business Income deduction, which can shelter up to 20% of pass-through profit from federal tax, is a federal benefit only. It doesn't reduce what you owe Alabama.
References
References:
- https://www.revenue.alabama.gov/tax-types/corporate-income-tax/
- https://www.revenue.alabama.gov/tax-types/individual-income-tax/
- https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
- https://www.irs.gov/faqs/estimated-tax
- https://www.revenue.alabama.gov/notice-important-changes-to-the-2024-business-privilege-tax-filing-requirements/
- https://web.archive.org/web/20230111151436/https://labor.alabama.gov/uc/employer.aspx
- https://www.revenue.alabama.gov/tax-types/sales-use/sales-tax/
- https://www.revenue.alabama.gov/individual-corporate/electing-pass-through-entities/
FAQs
Do Foreign LLCs Registered in Alabama Owe Alabama Taxes?
Yes, foreign LLCs registered in Alabama owe the same Business Privilege Tax and sales and use tax that domestic LLCs owe.
What Happens if an Alabama LLC Files Its Business Privilege Tax Late?
Filing an Alabama Business Privilege Tax return late triggers a penalty of 10% of the tax shown due or $50, whichever amount is greater, on top of the tax itself.
Can a Single-Member LLC Elect Alabama's Pass-Through Entity Tax?
No, a single-member LLC can't elect Alabama's Pass-Through Entity Tax because the election only covers S-corps and multi-member LLCs taxed as partnerships.
Does Alabama Require LLCs to File an Annual Report with the Secretary of State?
No, Alabama doesn't require LLCs to file an annual report with the Secretary of State. Only domestic and foreign for-profit corporations file that report, so LLCs handle the Business Privilege Tax with the Department of Revenue instead.
