Alabama Administrative Code › Title 810 - ALABAMA DEPARTMENT OF REVENUE › Chapter 810-3-14 - GROSS INCOME OF INDIVIDUALS › Section 810-3-14-.02 - Exclusions From Gross Income

Current through Register Vol. 42, No. 9, June 28, 2024
(1) Items which are excluded from gross
			 income are listed in §
								40-18-14(3),
Code of Ala. 1975
, as follows:
(a) Amounts received under life insurance
			 policies and contracts paid by reason of the death of the insured, in
			 accordance with  26 U.S.C. §
										101.
(b) Amounts received, other than amounts paid
			 by reason of the death of the insured, under life insurance, endowment or
			 annuity contracts determined in accordance with  26 U.S.C. §
										72.
(c) The value of property acquired by gift,
			 bequest, devise, or descent, in accordance with  26 U.S.C. §
										102  - the
			 income from such property shall be included in gross income.
1. Gross income does not include a fellowship
			 or grant that is an outright gift with no obligation on the part of the
			 recipient. Payments to an individual as a scholarship at an educational
			 institution or as a fellowship grant are excluded from the gross income of the
			 student to the extent that services are not required of the student in order to
			 receive the payments. The value of contributed services and accommodations are
			 also excluded from gross income. If there is a condition that a person must
			 teach or enter into employment, payments are not gifts.
2. Payments for teaching, research, or other
			 services in the nature of part-time employment required as a condition to
			 receiving the scholarship or fellowship grant are not exempt and should be
			 included in gross income.
3.
			 Prizes, awards, and scholarships are not specifically addressed by Alabama
			 income tax law. The Department will look to  26 U.S.C. §
											74, Prizes and
			 Awards, and  26 U.S.C. §
											117, Qualified Scholarships, as guidance to
			 determine whether specific prizes, awards, and scholarships are excluded from
			 gross income.
(d)
			 Interest upon obligations of the United States or its possessions; or
			 securities issued under provisions of the Federal Farm Loan Act of July 18,
			 1916. Examples of exempt obligations include U.S. Savings Bonds, U.S. Treasury
			 Notes or Bills, obligations of the Bank for Cooperatives, Federal Land Banks,
			 Federal Intermediate Credit Banks, Federal Home Loan Banks, Productions Credit
			 Associations, Federal Financing Bank, and the Tennessee Valley Authority.
			 Interest received from the United States government earned on other than
			 investment obligations, such as interest on tax refunds, is subject to Alabama
			 income tax and should be included in gross income.
(e) Amounts received which are excludable
			 from gross income under  26 U.S.C. §
										104, relating to compensation for
			 injuries or sickness.
(f) Amounts
			 received which are excludable from gross income under  26 U.S.C. §
										105,
			 relating to amounts received from accident or health plans.
(g) Interest on obligations of the State of
			 Alabama and any county, municipality, or other political subdivision thereof.
			 It should be noted that interest on obligations of other states and political
			 subdivisions thereof is taxable.
(h) The rental value of a parsonage provided
			 to a minister of the gospel, to the extent excludable under  26 U.S.C. §
										107.
(i) Income from
			 discharge of indebtedness to the extent allowed by  26 U.S.C. §
										108, with
			 the exception that the reductions in tax attributes required by  26 U.S.C. §
										108  shall be applied only to the net operating losses determined under
			 Alabama income tax law and to the basis of depreciable property. The basis
			 reductions of depreciable property shall not exceed the basis reductions for
			 federal income tax purposes. All other tax attribute reductions required by  26 U.S.C. §
										108  shall not be recognized.
(j) Gain from the sale of a personal
			 residence to the extent excludable for federal income tax purposes under  26 U.S.C. §
										121.
(k) Contributions
			 made by an employer on behalf of an employee to a trust which is a part of a
			 qualified cash or deferred arrangement, as defined in  26 U.S.C. §
										401(k)(2) or  5 U.S.C. §
										8437, subject to the limitations of  26 U.S.C. §
										402(g).
(l) Contributions,
			 made by an employer for an employee for an annuity contract, which would be
			 excludable from the gross income of the employee, in accordance with  26 U.S.C. §
										403(b), subject to the limitations of  26 U.S.C. §
										402(g).
(m) Amounts excludable in accordance with  26 U.S.C. §
										125, relating to cafeteria plans.
(n) Amounts excludable in accordance with  26 U.S.C. §
										132, relating to certain fringe benefits.
(o) Amounts excludable in accordance with  26 U.S.C. §
										129, relating to dependent care expenses.