Qualified employees can receive, on their Alabama tax return, an “above the line” deduction for 50% of the health insurance premiums they pay as a part of their employer provided health plan. The deduction is allowed regardless of whether the employee itemizes deductions or claims the standard deduction on the return. The deduction is allowed even if the premiums are paid with pre-tax dollars through a cafeteria plan.

Qualified employers may deduct as a business expense on their Alabama tax return, 50% of the health insurance premiums paid on behalf of qualified employees through the employer provided health insurance plan. The 50% deduction is in addition to the normal business expense deduction that the employer is allowed for these premiums. The result is that the health insurance premiums paid for qualified employees will be 150% deductible for Alabama purposes.