Alabama Schedule OC – Other Available Credits
Last reviewed: 2025-11-12
Use the Alabama Tax Form Calculator Form AL-40-Schedule-OC: Alabama Schedule OC – Other Available Credits as a stand alone tax form calculator to quickly calculate specific amounts for your 2026 Alabama state tax return. Alternatively, you can use one of our Combined Federal and State Tax Estimators to quickly calculate your salary, tax, and take-home pay.
Alabama Schedule OC consolidates the state’s extensive network of income tax credits into one unified filing. Taxpayers use this schedule to calculate, claim, and summarize every current-year and carryforward credit applicable to their Alabama Form 40 or 40NR return. From workforce incentives to rural medical service benefits, Schedule OC captures programs designed to stimulate economic growth, reward community service, and reduce tax burdens for qualifying individuals and businesses.
The form includes both refundable and nonrefundable credits, applying them in a structured hierarchy to offset total Alabama tax liability. It is essential to complete each part of the schedule carefully, as certain credits—such as the Full Employment Act or Innovate Alabama credits—require certification or approval from the Alabama Department of Revenue or partner agencies before they can be applied.
How to Complete Alabama Schedule OC
Schedule OC is divided into multiple sections (A through AA), each representing a specific credit type. Below is a summary of major sections and their computational approach:
- Section A – Current Tax Liability: Begin by entering your total tax liability from Form 40, line 17 (or 40NR, line 19). This figure forms the ceiling for nonrefundable credits.
- Parts A–I – Employment, Education & Foreign Credits:
- Basic Skills Education Credit (Part C): Receive 20% of approved training expenditures for employees who complete certified education programs.
- Full Employment Act Credit (Part F): Qualifying small businesses (≤50 employees) may claim $1,000 per new full-time employee.
- Veterans Employment Credit (Part G): Employers can claim $2,000 for each qualifying veteran hired, encouraging workforce reintegration.
- Credit for Foreign Taxes Paid (Part I): Limited to 50% of qualifying foreign income tax to prevent double taxation on global income.
- Parts J–R – Agriculture, Education & Community Development:
- Irrigation/Reservoir System Credit (Part J): Claim 20% of qualified agricultural system investments.
- Career–Technical Dual Enrollment Credit (Part O): Receive 50% of contributions to approved programs, capped at 50% of your tax liability.
- Growing Alabama Credit (Part R): Investments in certified regional economic projects earn credits equal to 50% of tax liability.
- Parts S–X – Innovation, Education & Infrastructure Credits:
- Apprenticeship Credit (Part S): Rewards employers for supporting skilled labor through state-approved apprenticeships.
- Innovate Alabama Credit (Part X): Provides a 50% offset for investments in technology startups and research-driven businesses.
- Sections C–F – Summary, Carryforwards, and Refundable Credits: Combine totals, apply carryforward rules, and calculate any refundable credit amounts, such as Adoption or Historic Rehabilitation credits.
Attach all supporting schedules (e.g., Schedule CR, EZ/K, AAC, AATC, or K-1s) as required. Missing documentation may delay or disqualify credits.
| SECTION A Current Tax Liability — enter tax from Form 40, p.1 line 17 (or Form 40NR, p.1 line 19). | ||
| A | Alabama tax liability to offset | |
| SECTION B Current Year Credits | ||
| PART A — Credit for Taxes Paid to Other States (Form 40 only) | ||
| A1 | Sum of Alabama Adjusted Gross Income attributable to all other states (Schedule CR, line 26) | |
| A2 | Alabama Adjusted Gross Income (Form 40, p.1 line 10) | |
| A3 | Total other states’ % of Alabama AGI (A1 ÷ A2) | |
| A4 | Multiply current tax liability (Section A) by A3 | |
| A5 | Enter line 27 from Schedule CR | |
| A6 | CREDIT ALLOWABLE (smaller of A4 or A5). Also enter on Section C, Part A, Column 3 | |
| PART B — Alabama Enterprise Zone Credit or Exemption | ||
| B1 | Amount from Schedule EZ/K, Part I p.2 line 13, or Schedule EZ Part IV p.2 line 13. Also enter on Section C, Part B, Column 3 | |
| PART C — Basic Skills Education Credit | ||
| C1 | Assigned Department of Education Certification Number | |
| C2 | Name of approved provider (and location) | |
| C3 | Were all participants continuously employed by you for at least 16 weeks? | |
| C4 | Did participants attend classes averaging at least 24 hours each week? | |
| C6 | Total eligible expenses (see instructions) | |
| C7 | CREDIT ALLOWABLE (C6 × 20%). Also enter on Section C, Part C, Column 3 | |
| PART D — Rural Physician Credit | ||
| D1 | Name of hospital/community where you live and provide medical services | |
| D2 | Maximum credit — Qualifying physician enter $5,000; if MFJ and both spouses qualify, enter $10,000 | |
| D3 | CREDIT ALLOWABLE (enter amount from D2). Also enter on Section C, Part D, Column 3 | |
| PART E — Coal Credit | ||
| E1 | Amount of Coal Credit reported on Schedule K-1 | |
| E2 | Pro rata share of credit from Schedule K-1 (if credit from more than one entity, attach schedule) | |
| E3 | CREDIT ALLOWABLE (E1 + E2). Also enter on Section C, Part E, Column 3 | |
| PART F — Full Employment Act of 2011 Credit* | ||
*Owners of qualified employers taxed as S-corps or partnerships answer the question below and complete F1–F7. | ||
| Q | Were you in business with 50 or fewer full & part-time employees on June 9, 2011? | |
| F1 | Number of full-time employees on 12-31-2022 | |
| F2 | Number of full-time employees on 12-31-2021 | |
| F3 | Subtract F2 from F1 (if ≤ 0, STOP — not qualified) | |
| F4 | Number of qualifying new employees in first 12 months of service in the tax year | |
| F5 | Multiply F4 by $1,000 | |
| F6 | Pro rata share of credit from Schedule K-1 (if more than one entity, attach schedule) | |
| F7 | CREDIT ALLOWABLE (F5 + F6). Also enter on Section C, Part F, Column 3 | |
| PART G — Veterans Employment Act – Employer’s Credit | ||
| G1 | Number of unemployed veterans included in Part F, line F4 | |
| G2 | G1 × $2,000 | |
| G3 | Pro rata share of credit from Schedule K-1 (enter FEIN in notes if needed) | |
| G4 | CREDIT ALLOWABLE (G2 + G3). Also enter on Section C, Part G, Column 3 | |
| PART H — Veterans Employment Act – Business Start-Up Expense Credit | ||
| HQ | Did this business start up after April 2, 2012? | |
| H1 | Name and business ID number | |
| H2 | Total business start-up expenses | |
| H3 | Maximum credit (see instructions) | |
| H4 | Lesser of H2 or H3 | |
| H5 | Pro rata share of credit from Schedule K-1 | |
| H6 | CREDIT ALLOWABLE (H4 + H5). Also enter on Section C, Part H, Column 3 | |
| PART I — Credit for Taxes Paid to a Foreign Country (Form 40 only) | ||
| I1 | S corporation/Partnership/Estate/Trust name | |
| I2 | FEIN | |
| I3 | Name of foreign country | |
| I4 | Your pro rata share in entity | |
| I5 | Pro rata share of income from foreign operations | |
| I6 | Alabama tax imposed on the income in I5 | |
| I7 | Pro rata share of tax due the foreign country | |
| I8 | 50% of I7 | |
| I9 | CREDIT ALLOWABLE (lesser of I6 or I8). Also enter on Section C, Part I, Column 3 | |
| PART J — Qualified Irrigation System / Reservoir System Tax Credit | ||
| Jt | Type (select one) | |
| J1 | Purchase & installation cost of irrigation system | |
| J2 | Conversion costs (fuel to electricity) | |
| J3 | J1 + J2 | |
| J4 | 20% of J3 | |
| J5 | Cost of reservoir construction | |
| J6 | 20% of J5 | |
| J7 | Enter amount from J4 or J6 (but not both) | |
| J8 | Credit limit | |
| J9 | Lesser of J7 or J8 | |
| J10 | Pro rata share of credit from Schedule K-1 | |
| J11 | MAXIMUM CREDIT ALLOWABLE (J9 + J10). Also enter on Section C, Part J, Column 3 | |
| PART K — Alabama Accountability Tax Credit – School Transfer Credit | ||
| K1 | Total cost of attending nonfailing public or nonpublic school (from Schedule AATC, line 37) | |
| PART L — Alabama Accountability Act Credit – Scholarship Granting Organization (SGO) | ||
| L1 | Name of SGO | |
| L2 | Address of SGO | |
| L3 | Amount contributed for scholarship(s) | |
| L4 | Pro rata share of credit from Schedule K-1 | |
| L5 | Current year credit available (L3 + L4) | |
| L6 | Maximum credit allowable for current year contribution | |
| L7 | Current year credit allowable (lesser of L5 or L6). Also enter on Section C, Part L, Column 3 | |
| PART M — Alabama Adoption Tax Credit | ||
| M1 | CREDIT ALLOWABLE (from Schedule AAC Part III, line 3). Also enter on Section C, Part M, Column 3 | |
| PART N — 2013 Alabama Historic Rehabilitation Tax Credit (pre-2018 projects) | ||
| N1a | Tax credit certificate amount — project a | |
| N1b | Tax credit certificate amount — project b | |
| N1c | Tax credit certificate amount — project c | |
| N2 | Total credit (N1a + N1b + N1c) | |
| N3 | Pro rata share of credit from Schedule K-1 | |
| N4 | CREDIT ALLOWABLE (N2 + N3). Also enter on Section C, Part N, Column 3 | |
| PART O — Career–Technical Dual Enrollment Credit | ||
| O1 | Amount contributed (certificate amount) | |
| O2 | Current credit (O1 × 0.50) | |
| O3 | Pro rata share of credit from Schedule K-1 | |
| O4 | Current year credit available (O2 + O3) | |
| O5 | 50% of Current Tax Liability (Section A × 0.50) | |
| O6 | Maximum credit | |
| O7 | Current year credit allowable (least of O4, O5, O6). Also enter on Section C, Part O, Column 3 | |
| O8 | Max credit allowable for prior-year carryforward (O5 − O7) | |
| O9 — Carryforward grid will be captured in Section D below | ||
| PART P — Investment Credit — Alabama Jobs Act | ||
| P1 | Current year’s investment credit allocated to income tax | |
| P2 | Allocated share of credit from Schedule K-1 | |
| P3 | CREDIT ALLOWABLE (P1 + P2). Also enter on Section C, Part P, Column 3 | |
| PART Q — Port Credit — Alabama Renewal Act | ||
| Q1 | Port Credit amount certified | |
| Q2 | Pro rata share of credit from Schedule K-1 | |
| Q3 | CREDIT ALLOWABLE (Q1 + Q2). Also enter on Section C, Part Q, Column 3 | |
| PART R — Growing Alabama Credit | ||
| R1 | Amount(s) approved for contribution | |
| R2 | Pro rata share of credit from Schedule K-1 | |
| R3 | Current year credit available (R1 + R2) | |
| R4 | 50% of Current Tax Liability (Section A × 0.50) | |
| R5 | Current year credit allowable (lesser of R3 or R4). Also enter on Section C, Part R, Column 3 | |
| R6 | Max credit allowable for prior-year carryforward (R4 − R5) | |
| R7 — Carryforward grid will be captured in Section D below | ||
| PART S — Apprenticeship Tax Credit | ||
| S1 | Credit from Alabama Apprenticeship Tax Credit Certificate | |
| S2 | Pro rata share of credit from Schedule K-1 | |
| S3 | CREDIT ALLOWABLE (S1 + S2). Also enter on Section C, Part S, Column 3 | |
| PART T — 2017 Alabama Historic Rehabilitation Tax Credit (projects 2018+) | ||
| T1a | Credit certificate amount — project a | |
| T1b | Credit certificate amount — project b | |
| T1c | Credit certificate amount — project c | |
| T2 | CREDIT ALLOWABLE (T1a + T1b + T1c). Also enter on Section C, Part T, Column 3 | |
| PART U — Railroad Modernization Act of 2019 Credit | ||
| U1 | Credit per Transfer Credit Certificate. Also enter on Section C, Part U, Column 3 | |
| PART V — Storm Shelter Credit | ||
| V1 | Credit from Alabama Emergency Management Agency certificate | |
| PART W — Volunteer Emergency Responders Tax Credit | ||
| W1 | Amount from Emergency Responders Credit certificate | |
| PART X — Innovate Alabama Credit | ||
| X1 | Amount approved by Innovate Alabama | |
| X2 | Pro rata share of credit from Schedule K-1 | |
| X3 | Current year credit available (X1 + X2) | |
| X4 | 50% of Current Tax Liability (Section A × 0.50) | |
| X5 | Current year credit allowable (lesser of X3 or X4). Also enter on Section C, Part X, Column 3 | |
| X6 | Max credit allowable for prior-year carryforward (X4 − X5) | |
| X7 — Carryforward grid will be captured in Section D below | ||
| PART Y — Volunteer First Responder Mileage Income Tax Credit | ||
| Y1 | Amount from Mileage Credit certificate | |
| PART Z — Preceptor Tax Incentive Credit | ||
| Z1 | Amount from Preceptor Program certificate | |
| PART AA — Income Tax Capital Credit | ||
| AA1 | Capital Credit allowable (Schedule KRCC-I, Part III, line 5). Also enter on Section C, Part AA, Column 3 | |
| SECTION C — Current Credit Summary (enter each Part A–AA in Column 1–7; totals computed in JI) | ||
| SC1 | Total Current Credits — sum of Column 5 across Parts A–AA | |
| SECTION D — Credit Carryforward — Prior Years | ||
| D1 | Carryforward Row 1 — Allowable this period (enter per instructions) | |
| D2 | Carryforward Row 2 — Allowable this period | |
| D3 | Carryforward Row 3 — Allowable this period | |
| D21 | Total Prior Year Credit Carryforward Applied — sum of Section D rows | |
| SECTION E — Net Tax Due Computation | ||
| E1 | Current Year Tax Liability (from Section A) | |
| E2 | Total Current Year Credits Applied (from Section C, line SC1) | |
| E3 | Prior Year Carryforwards Applied (from Section D, line D21) | |
| E4 | Total Credits Utilized This Year (E2 + E3) | |
| E5 | Net Tax Due (E1 − E4) — also post to Form 40 p.1 line 18 or 40NR p.1 line 20 | |
| SECTION F — Total Refundable Credits | ||
| F1 | School Transfer (Part K) refundable portion (Section C Part K Col 3 − Col 5) | |
| F2 | Adoption Credit (Part M) refundable portion (Section C Part M Col 3 − Col 5) | |
| F3 | 2017 Historic Rehab (Part T) refundable portion (Section C Part T Col 3 − Col 5) | |
| F4 | Total Refundable Credits (F1 + F2 + F3) — also post to return p.1 line 25 | |
Understanding the Broader Impact of Alabama’s Tax Credits
Each credit on Schedule OC represents a targeted initiative by the state to support key sectors of Alabama’s economy and improve quality of life:
- Job Creation & Retention: Programs like the Full Employment Act and Veterans Employment Credits encourage employers to hire within the state, supporting both local economies and military families transitioning to civilian life.
- Rural & Agricultural Development: Credits for rural physicians, irrigation, and reservoir construction aim to strengthen healthcare access and agricultural sustainability across Alabama’s rural communities.
- Education & Workforce Development: The Basic Skills Education and Career–Technical Dual Enrollment credits directly fund skills training and technical education partnerships, reducing workforce shortages in critical industries.
- Community Revitalization: The Historic Rehabilitation and Growing Alabama credits encourage investment in local redevelopment and infrastructure, revitalizing aging communities and heritage sites.
- Innovation & Technology: Through the Innovate Alabama Credit, the state fosters growth in startups and advanced research, positioning Alabama as a regional hub for innovation and entrepreneurship.
Collectively, these programs make Schedule OC one of the most complex yet valuable parts of Alabama’s tax filing system—bridging fiscal responsibility with social progress.
Last reviewed: 2025-11-12: If you believe this form requires an update, please contact us.
Further Guidance and Related Resources
- Form AL-40 – Individual Income Tax Return
- Form AL-40 Schedule CR – Credit for Taxes Paid to Other States
- Mortgage Calculator – Estimate Payments and Homeownership Costs
- Alabama Department of Revenue – Individual Income Tax
Schedule OC not only offers numerous credits to reduce tax liability but also reflects Alabama’s commitment to inclusive growth and opportunity. Taxpayers are encouraged to review each credit category carefully to maximize their benefit while contributing to a stronger, more prosperous state economy.
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Frequently Asked Questions
How does income allocation work for part-year residents filing AL-40NR?
For part-year residents, Form AL-40NR requires a two-step process: (1) report all income from all sources on the federal-equivalent side of the return, and (2) allocate only Alabama-sourced income into the Alabama column. Income earned while you were physically residing in Alabama is generally considered Alabama-sourced, regardless of employer location. Meanwhile, income earned while domiciled outside Alabama is Alabama-sourced only if the economic activity occurred within the state—such as performing work in Alabama, operating a business there, or earning income from Alabama property. Deductions must also be apportioned: some are fully allowed, while others (e.g., certain business expenses) must be split proportionally. Accurate allocation ensures the tax is calculated only on income legally attributable to Alabama. Completing this allocation carefully often prevents over-taxation and produces a fair representation of your Alabama tax liability.
What is Alabama Schedule ATP and when is it required?
Alabama Schedule ATP is used to calculate and report additional taxes and penalties that arise when certain tax conditions are not met. Unlike other schedules that compute income or deductions, Schedule ATP focuses on situations such as early withdrawal penalties on education savings accounts, repayment requirements for certain credits, penalties for failure to file or pay timely, and other special-case tax assessments defined under Alabama law. This schedule functions as a central place where all supplemental taxes must be disclosed to ensure the taxpayer’s Form AL-40 or AL-40NR accurately reflects total liability. Failing to include required ATP entries may lead to ADOR corrections, additional assessments, or interest charges. Because of this, Schedule ATP is an essential compliance document for taxpayers who triggered any mid-year disallowed benefits, timing-related penalties, or other exceptions.
Are HSA contributions pre-tax for Alabama?
Generally pre-tax federally and often for Alabama; confirm in the state section and add in the calculator.
What is Alabama Schedule DC used for?
Schedule DC allows Alabama taxpayers to claim a deduction for qualified dependent-care expenses that enable them to work or actively seek employment. These expenses may include daycare, after-school programs, in-home childcare, or care for a disabled spouse or dependent who cannot care for themselves. Alabama’s rules parallel many federal provisions but apply at the state-deduction level rather than as a credit. To use Schedule DC, both spouses must have earned income when filing jointly unless one spouse is disabled or a full-time student. The deduction is limited by earned income, the dependency status of the individual receiving care and Alabama’s maximum per-dependent limits. Proper documentation is required for all expenses.
How does Alabama treat passive activity losses and out-of-state pass-through income?
Alabama generally follows federal passive-activity rules but requires taxpayers to separately identify passive losses on Schedule E so they can be applied only where permitted. If you have losses disallowed at the federal level, they remain disallowed in Alabama unless the state provides a separate exception. For pass-through income earned in another state, Alabama requires residents to report the full amount, then claim any allowable adjustments or credits on other schedules such as Schedule CR. The Schedule E calculator prepares totals that flow into Alabama Form 40 so the correct taxable amount appears on the return.
Important Notes
All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.