Alabama Act 2022-37 Changes to Calculation of Alabama Federal Income Tax Deduction

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Alabama recently passed Act 2022-37 which includes changes to the calculation of the Alabama Federal Income Tax Deduction.

These changes may affect taxpayers who file an Alabama tax return and have one or more of the following credits:

• Federal child tax credit (including advanced child tax credit payments received in 2021)
• Earned income tax credit
• Federal child and dependent care credits

Alabama has released an updated Federal Income Tax Deduction Worksheet that is currently under development. In the meantime, Alabama will automatically re-compute the Federal Income Tax Deduction for affected taxpayers who electronically file returns prior to the updated Federal Income Tax Deduction Worksheet being developed and released.

Note:

• Alabama will only adjust returns for affected taxpayers who electronically file their Alabama return,
• Any affected taxpayers who paper file prior to the updated worksheet being available will have to amend their return once the updated worksheet is available.

Alabama Press Release (this link will take you to the Alabama DOR website, for more details) 

Program Details available below, see: Update Details in Lacerte

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For more Lacerte News and Updates, click here.

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Update Details in Lacerte:

The updated Alabama Federal Income Tax Deduction Worksheet is available on the March 29, 2022 release (Version 42.0329). This updated worksheet changes the calculation of the Federal Income Tax Deduction for taxpayers who file an Individual Alabama tax return and have one or more of the following credits:

• Federal child tax credit (including advanced child tax credit payments received in 2021)
• Earned income tax credit
• Federal child and dependent care credits

Taxpayers filing an Alabama Individual tax return, must now file using the updated version of the Federal Income Tax Deduction Worksheet. If a taxpayer electronically filed an Alabama Individual tax return prior to the release of the updated worksheet and is affected, Alabama will automatically re-compute the federal income tax deduction. If a taxpayer is affected and filed their return on paper prior to the updated worksheet being available, an Amended return may need to be filed.

For more information about the changes to the Alabama federal income tax deduction, please see the Alabama press release at https://revenue.alabama.gov/arpa-tax-relief/

For steps to amend a return in Lacerte, see How to amend a state return in Lacerte