Quick answer: up to 5% state tax, taxed the same as ordinary income — but Alabama is one of the few states that lets a filer deduct federal income taxes already paid, softening the effective rate. See the full cost picture in the Alabama probate real estate sale calculator.
Ordinary income treatment, brackets frozen since 1935
A genuinely rare deduction
Alabama is one of only a few states that lets taxpayers deduct the federal income taxes they actually paid from their Alabama taxable income — a real, distinctive break that can meaningfully lower the effective state rate on a large capital gain, unlike almost anywhere else.
No estate or inheritance tax to layer on top
Alabama imposes neither a state estate tax nor an inheritance tax, so only the federal estate tax, with its much higher 2026 threshold, can apply — and that's a separate calculation from the income tax owed on any gain when the house is sold.
The stepped-up basis still helps
Regardless of Alabama's rate structure, the house's basis resets to its fair market value on the date of death for federal purposes, and Alabama's calculation follows that same starting point — only appreciation after death is taxable, keeping the gain small on a prompt sale.
A local probate attorney can review your estate — many offer a free consultation.
The 5% top rate applies identically whether the sale closes in Jefferson, Mobile, Madison, or any other Alabama county, though some Alabama cities layer on their own local occupational tax on wages.