Alabama Rural Hospital Investment Tax Credit (2026-2028) – Planning Opportunity Starting in 2026

Alabama has enacted a Rural Hospital Investment Tax Credit that can provide a dollar-for-dollar Alabama tax credit for cash donations to Board-approved, eligible rural hospitals or certain approved third-party entities that distribute funds among eligible hospitals.

 Credits are awarded first-come, first-served, and subject to annual statewide and per-hospital caps. For tax year 2026, reservations opened January 5, 2026, through the My Alabama Taxes (MAT) portal.

For 2026, the tax credit has an annual statewide aggregate cap of $20 million, and an annual cap per eligible rural hospital of $750,000. After reserving a credit, the donor must make the cash donation within 30 days of the reservation approval date, and the hospital/third party must certify receipt within 60 days of the reservation approval date, or the reservation will be forfeited.

Alabama residents and multi-state/nonresident taxpayers with Alabama-source income may benefit if they have Alabama tax liability to offset. The credit may be used against Alabama income tax and may also apply to certain entity-level Alabama taxes including financial institution excise tax, insurance premium tax, and certain utility taxes.

Annual credit limits vary by taxpayer type (e.g., individuals up to $15,000 Single, Head of Household, Married Filing Single/$30,000 Married Filing Jointly; pass-through entities up to $450,000; corporations/financial institutions/insurers up to $500,000 subject to additional limitations).

The IRS “quid-pro-quo” rules reduce the federal charitable contribution deduction by the amount of the state tax credit—often resulting in little to no federal charitable deduction.

This credit is limited and time sensitive. Please contact a BMSS Tax Advisor by calling (833) CPA-BMSS to discuss your specific situation and determine if you are eligible to benefit from this program.