Stimulus payments and PPP loans are subject to state taxes in Alabama, for now

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MOBILE, Ala. (WKRG) — Will you be paying taxes in 2021 on the stimulus money you received this year? It’s a question for state legislators who tried to take up that issue during this past year’s legislative session that was shortened by the coronavirus pandemic.

The stimulus money you received this year is shielded from federal taxes, but not from state taxes.

“Last session I filed a bill that would have addressed that–I had a collegues bill that I kind of worked that into that got to the floor but unfortunately the house and senate both adjourned prior to taking that up,” said District 32 State Senator Chris Elliott.

The Alabama Daily News reported several legislators are concerned and agree that stimulus money should not be taxed. There is also the issue of Paycheck Protection Loans (PPP). Those were doled out to businesses to help keep them running and keep employees on board. Once they are forgiven, they will also become subject to state taxes.

It’s a situation that is timely, since by the time the new legislative session begins on the first Tuesday of March in 2021, many people, and more importantly, most businesses, will be in the midst of filing their tax returns.

Elliott believes the issue needs to be addressed before then.

“The governor needs to call the legislature back into a special session,” he said. “There are important issues like these that need to be addressed.”

Barring a special session, Elliott says he hopes it is one of the first issues taken up at the state of the 2021 session.

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