Retiring here? Florida's no-income-tax edge is real. Alabama's property tax edge is usually bigger.

A couple called me in the spring from Ohio. They had already picked their state. Florida, because Florida has no income tax, and at that point in the conversation the decision was closed. They just needed somebody to show them houses on Perdido Key.

We looked. They also crossed the bridge and looked at Orange Beach, mostly to be thorough. Then I ran both property tax bills on a legal pad at the kitchen table, and the decision opened back up.

Here is the thing about the state line out here. It runs through Perdido Key. You can stand in Alabama and see Florida. The drive between the two houses they liked was about eight minutes. And the annual tax difference between them, on the same money, was larger than most people’s car payment. Not in the direction they expected.

This is not a pitch for one side. I am licensed in both states and I sell on both sides of that line every year. It is a pitch for running all four numbers before you decide, instead of one.

What Florida actually saves you

Florida has no state income tax on individuals, and it is not a policy that can quietly change on you. Article VII, Section 5 of the Florida Constitution blocks the legislature from levying one. That is real, it is durable, and if you are drawing heavily on a traditional IRA or a 401(k), it is worth money every single year.

So score that one honestly for Florida and keep going.

What Alabama already exempts

Alabama does have an income tax. What people miss is how much retirement income never reaches it.

Per the Alabama Department of Revenue’s list of income exempt from Alabama income taxation, none of the following is taxed by the state: federal Social Security benefits, payments from a defined benefit retirement plan under IRC 414(j), military retirement pay, United States Civil Service Retirement System benefits, federal Railroad Retirement benefits, and the State of Alabama Teachers and Employees Retirement System benefits.

Read that list again if you have a pension. A traditional employer pension and your Social Security can both land in Alabama completely untouched.

What Alabama does tax is the defined contribution money. Traditional 401(k) and IRA withdrawals are taxable here. There is one break: on Schedule RS, a taxpayer who is 65 or older and receives taxable retirement income is eligible for an exclusion of up to $6,000, not to exceed the amount taxable to Alabama. It is per taxpayer, not per couple, and it only offsets that person’s own taxable retirement income. If one spouse holds all of the IRA money, you get one $6,000 exclusion, not two.

Alabama’s rates, filing jointly, are 2% on the first $1,000 of taxable income, 4% on the next $5,000, and 5% on everything above $6,000.

The income side, worked. Say you are both 65 or older, with $60,000 of Social Security, a $30,000 pension, and $40,000 a year coming out of traditional IRAs, split between you. Social Security is exempt. The pension is exempt. The $40,000 is taxable, less $6,000 each, so $28,000 reaches Alabama’s brackets. That runs about $1,320 before any deductions your preparer applies.

Florida: zero. Alabama: roughly thirteen hundred dollars. Florida wins that round by about what a decent insurance deductible costs.

The number nobody runs first

Now the property tax, which for most retirees on this coast is the bigger line by a wide margin.

Alabama classifies property before it taxes it. Under the Department of Revenue’s classification table, Class III covers agricultural, forest, and single-family owner occupied residential property, and it is assessed at 10% of fair market value. Not 100%. Ten.

Florida assesses at just value, then subtracts exemptions. Homestead takes off up to $50,000: the first $25,000 applies to all property taxes including the school levies, and the additional $25,000 applies to assessed value over $50,000 and to non-school levies only.

Two different machines. Watch what they do to the same house.

The property side, worked. A $500,000 primary residence, first year of ownership.

In Gulf Shores, the city’s own tax page puts the total millage rate at 33.0. Assessed value is 10% of $500,000, or $50,000. Multiply by 33.0 mills and you get $1,650. Baldwin County’s regular homestead exemption knocks off up to $45 more. Call it about $1,605 a year.

On Perdido Key, which is unincorporated Escambia County, the Tax Collector’s 2025 millage detail puts the unincorporated rate at 13.4035 mills, of which 5.3590 is the school portion. Homestead leaves $475,000 exposed to the school levy and $450,000 exposed to the rest. That works out to about $2,546 plus about $3,620, or roughly $6,170 a year.

About $1,605 in Alabama. About $6,170 in Florida. A difference of roughly $4,560 every year, on the same house, eight minutes apart.

And notice that Alabama’s millage rate is two and a half times Florida’s. It does not matter. The 10% assessment ratio does all the work before the millage ever gets a turn.

Net it out against the income tax: that couple was giving up about $4,560 of property tax savings to avoid about $1,320 of income tax. They were roughly $3,200 a year behind on their own plan, and that estimate is conservative, because their Alabama income tax would land lower after deductions.

Where Alabama’s advantage disappears

Now the part I have to say plainly, because it flips the answer for a lot of coastal buyers.

That 10% ratio is for single-family owner occupied residential property. If the place is a second home, a rental, or anything other than your actual primary residence, it falls to Class II, which the state assesses at 20% of fair market value. Everything not otherwise classified.

Same $500,000 house in Gulf Shores, not your primary residence: $100,000 assessed, times 33.0 mills, is $3,300. Your bill doubled. Meanwhile in Escambia County the same non-homesteaded house runs the full $500,000 through 13.4035 mills, about $6,700.

Alabama is still ahead there, but the gap narrows a lot, and the rest of the second-home math on this coast, wind insurance, dues, and what a rental actually nets, will matter more than either tax bill. Do not buy a beach condo for the assessment ratio.

What Florida gives you that Alabama does not

Florida’s real gift to a long-term owner is not the exemption amount. It is Save Our Homes. After the first year a home receives homestead exemption and is assessed at just value, the assessment cannot increase more than three percent or the change in the Consumer Price Index, whichever is less. Hold a Florida homestead for twenty years in an appreciating market and that cap becomes enormous.

And it travels. If you are moving from one Florida homestead to another, portability lets you transfer all or part of your accumulated benefit, as long as you establish the new homestead within three years of January 1 of the year you abandoned the old one, using Form DR-501T.

Two honest consequences of that. If you are already a long-time Florida homesteader, your real Florida number is nothing like my first-year example, and you should get your actual assessed value off the property appraiser’s site before you compare anything. And if you sell that homestead and buy in Alabama, the benefit does not come with you. It dies at the state line.

The two deadlines that cost people money

Neither state mails you the savings. You claim them, and the calendars do not match.

In Baldwin County, the regular homestead claim is filed once, before December 31 of the year you purchased, and you have to live in the house on October 1 of the year claimed. The age 65 and over exemptions are their own thing. H-2 uses adjusted gross income of $12,000 or less on the most recent state return. H-3 uses taxable income of $12,000 or less on the federal return and totally exempts the property from all taxes. H-4 covers owners 65 and older whose income is above $12,000, and still exempts the state portion. H-2 and H-3 must be validated annually by signature, so this is not a set-it-and-forget-it item.

In Florida, Form DR-501 goes to the county property appraiser by March 1 of the tax year, and you must have made the property your permanent residence by January 1. Escambia County also runs the local additional exemption for owners 65 and older, tied to an income limit the legislature adjusts every year. Escambia’s published figure for the 2025 filing was adjusted gross income of $38,686 or less.

Miss either deadline and you pay a full year at full freight for a form you could have filed.

The short version

• Run four numbers, not one: income tax, property tax, insurance, and dues. The income tax is usually the smallest of the four.
• Alabama’s edge is the 10% owner-occupied assessment ratio, and it only exists if the house is genuinely your primary residence.
• If you have a pension and Social Security, a lot of what you feared Alabama would tax, it does not tax at all.
• If you are a long-time Florida homesteader, pull your real assessed value before you compare. Save Our Homes may already have you far below my example.
• File the paperwork. December 31 of the purchase year in Baldwin County. March 1 in Florida.
• Nothing here is tax advice. Take these numbers to your own preparer, because your pension type and withdrawal mix change the answer.

That Ohio couple bought in Orange Beach. Not because Alabama won on principle, but because on their particular mix of pension and IRA money, it won on the legal pad. A different couple, with all of their retirement income in traditional IRAs and a twenty-year Florida homestead behind them, would have gone the other way, and I would have written that offer just as happily.

I am Mandy Longshore with RE/MAX of Gulf Shores, licensed in Alabama and Florida. If you are planning a move to this coast and want to see the four numbers side by side for your situation before you pick a side of the line, call or text me at (251) 597-5809. No pressure, just honest numbers.