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
What happens if Form AL-40X shows that I owe additional Alabama tax?
If your amended return results in a higher tax liability, you should pay the additional amount when you file AL-40X. Interest on underpaid tax generally accrues from the original due date of the return, not the date you amend, so delaying payment only increases the final cost. If you are mailing a check, Alabama recommends using a payment voucher such as Form AL-40V or AL-40NRV, depending on whether you are a resident or nonresident, so that your payment is correctly tied to the amended year and account. Failure to settle the extra liability can lead to billing notices, further interest, and potential collection actions. Even so, voluntarily amending and paying usually results in a better outcome than waiting for Alabama or the IRS to discover discrepancies.
What records should parents keep to support a Schedule AATC claim?
Parents should retain invoices, tuition bills, proof of payment (bank statements, receipts), enrollment confirmations, and school documentation proving entry into the non-failing or nonpublic school. The Alabama Accountability Act requires strict substantiation to prevent misuse, so taxpayers should also keep the school’s classification documents or confirmation that the original school appeared on the “failing school” list for the appropriate year. If audited, the Alabama Department of Revenue may request these records to validate the refundable credit. While documents are not mailed with the return, they should be kept for at least three years.
How can I estimate my Alabama tax before using Form 40A?
You can preview your expected liability with the Alabama State Tax Calculator. It uses current rates, thresholds, and personal exemptions to show how much tax you’ll owe or be refunded. This is especially useful if you are switching from the full Form 40 or adjusting withholding.
Who must file Alabama Form AL-40NR and how does it differ from the resident Form AL-40?
Form AL-40NR is required for individuals who were not Alabama residents for the tax year, or who lived in the state only part-time, but earned income from Alabama sources. Unlike the resident Form AL-40, which reports all income from all sources, Form AL-40NR focuses on allocating income between Alabama and other jurisdictions. You must complete the return if you earned wages for work performed in Alabama, had rental property within the state, received income through a pass-through entity operating in Alabama, or sold property located in Alabama. Part-year residents must report income earned while domiciled in the state and any income sourced to Alabama thereafter. The AL-40NR also requires an allocation schedule to separate Alabama-sourced income from non-Alabama income, ensuring the correct proportion of tax is calculated. This prevents nonresidents from overpaying on non-Alabama income while still ensuring Alabama collects the correct amount on in-state activity.
Why don’t my brackets match payroll tables?
Employers may use different rounding/timing tables; small variances are normal.
Important Notes
All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.