Alabama property tax: how it works and the homestead exemption

How is the value set?

The county tax assessor values property and assesses it to the owner of record (§ 40-7-1). The assessed value is a percentage of market value, set by class (§ 40-8-1):

“Residential” in Class III means real property the owner uses exclusively as a single-family dwelling (§ 40-8-1(b)). A rental house is therefore in Class II at 20%.

What does one mill mean?

A mill is $1 of tax per $1,000 of assessed value. The formula is assessed value × total mills ÷ 1,000, minus the effect of any exemption on each levy.

What does the homestead exemption save?

A homestead is a single-family owner-occupied dwelling and its land, up to 160 acres. The owner must live there as a primary residence on the first day of the tax year (Alabama Department of Revenue). For owners under 65, § 40-9-19 sets:

Owners 65 or older, permanently and totally disabled, or blind are exempt from all state property tax. Larger county exemptions apply under the H-2 and H-3 rules, which depend on income. The Department of Revenue lists the tests, and you apply at your county office. Check with the Jefferson County tax assessor whether Birmingham or the county grants a local exemption. The county’s website blocked our automated request, so we could not read it.

How does the 7% cap work?

For Class II and III real property, the taxable assessed value cannot rise more than 7% a year (§ 40-7-2.2). The Department of Revenue says the base year was October 1, 2024, for tax collections starting October 1, 2025, and the statute runs through the fiscal year beginning October 1, 2027.

The cap is removed when the property changes ownership, when its class changes, or when it is newly assessed or improved. Transfers between spouses or family members for no or nominal consideration are an exception. The Department of Revenue warns buyers not to assume they will pay the seller’s tax: after a sale, the taxable value is reset to the true assessed value for the next tax year.

Example: a $250,000 home in Birmingham

This is an illustration. It uses the Department of Revenue’s October 2025 millage for a home in the Birmingham school district, an owner under 65, and the state and county exemptions above. The assessed value is $250,000 × 10% = $25,000.

Without exemptions, the bill would be $25,000 × 72.5 ÷ 1,000 = $1,812.50, so the two statutory exemptions save $53.00. A local exemption, if any, would lower it further. The Department of Revenue also lists a $5 storm water fee for Class III property in most Jefferson County districts. Homes in other school districts have different millage.

For the other closing costs, see closing costs in Alabama and Birmingham. Lenders often collect the tax through an escrow account.

When is the tax due, and how do you appeal?

The Department of Revenue states that property taxes become due on October 1 and are delinquent if paid after December 31.

To challenge the market value, file a written objection with the secretary of the county board of equalization within 30 calendar days of the final publication of the assessment notice (§ 40-3-20). Describe the property and your reason. You may appear in person or by an agent or attorney (§ 40-3-19).

If the board keeps the value, you can appeal to circuit court within 30 calendar days of the board’s notice. You must pay the prior year’s tax before it becomes delinquent, or the court must dismiss the appeal unless you post a bond for double the tax (§ 40-3-25).