Alabama House passes overtime tax cut, grocery tax holiday in major relief push

The Alabama House of Representatives passed HB527 on Tuesday, delivering an Alabama overtime tax cut of up to $1,000 on qualified overtime pay and adding a 60-day grocery tax holiday, combining for a total fiscal impact of $83.4 million.

HB527, sponsored by State Rep. James Lomax (R-Huntsville), would allow taxpayers to deduct up to $1,000 in overtime pay from their state taxable income each year beginning in 2026. The deduction expires after 2028 unless extended.

The bill’s initial fiscal note was $37.4 million. State Rep. Mike Shaw (R-Hoover) offered an amendment on the floor to attach the 60-day grocery tax holiday, bringing the total fiscal note to $83.4 million.

The bill mirrors President Trump’s “no tax on overtime” policy included in the One Big Beautiful Bill Act, applying similar relief at the state level.

“The men and women working overtime shifts to provide for their families are also providing a significant boost to our state’s economy,” Lomax said. “I am proud to carry this legislation in an effort to support and thank them.”

The grocery tax holiday builds on existing legislative action on food costs. In 2023, the Legislature reduced the state grocery tax from 4 percent to 3 percent. During the 2025 session, the House accelerated that effort by cutting it further to 2 percent.

Alabama families are already saving roughly $236 a year from that existing cut, and the temporary two-month suspension of the remaining 2 percent would deliver roughly $40 in additional immediate relief for a typical family of four.

House Speaker Nathaniel Ledbetter (R-Rainsville) said the measure reflects a broader legislative push on affordability.

“With fuel prices surging and the price of beef and other essential items at the grocery store nearing all-time highs, it is imperative that state leaders double down on our efforts to lend a helping hand to Alabamians,” Ledbetter said. “Over the course of the last few weeks, I have worked with Governor Ivey and Senate leadership to determine the most expedient and impactful way to provide targeted relief, and we have determined that a 60-day grocery tax holiday presents the best opportunity to lift up every single Alabama family.”

Since 2022, the Alabama Legislature has delivered more than $1.4 billion in tax cuts to working families and retirees statewide. HB527 now moves to the Senate for consideration.

Tuesday was the 25th legislative day. There are five days remaining in the session.

Sawyer Knowles is a capitol reporter for Yellowhammer News. You may contact him at [email protected].