Understanding the Alabama Rural Hospital Investment Tax Credit

The Alabama Rural Hospital Investment Tax Credit program (part of the Rural Hospital Investment Act of 2025) allows individuals and businesses to receive a dollar-for-dollar tax credit on their state taxes for qualified donations to eligible rural hospitals. The program becomes effective in January 2026 and runs through December 2028, unless extended by the legislature. 

How the Program Works

Donors must first secure a credit reservation through the My Alabama Taxes system which opens on January 5, 2025.

To increase your chance of obtaining a credit reservation, we suggest being ready at midnight on January 4, 2025, so that the system can be entered at 12:00:01 AM on January 5^th to make the credit reservation.  Credits are limited and expected to be in high demand. 

After reserving the credit, the donor has 30 days to make the monetary donation to an eligible hospital or approved third party. The hospital must then certify the donation within 60 days of the reservation date to finalize the tax credit. 

Key Program Provisions

The Alabama Rural Hospital Investment Tax Credit includes specific provisions that govern eligibility, credit limits, and the use of funds. Understanding these parameters is important for evaluating participation and planning contributions. Key provisions include:

• Dollar-for-Dollar Credit: Donors receive a credit equal to 100% of their donation against various state taxes, including income, financial institution excise, insurance premium, and utility taxes.
• Donor Limits: The maximum annual credit amounts vary by filing status:
  • Individuals (single/separate filers): Up to $15,000
  • Married couples (joint filers): Up to $30,000
  • Pass-through entities: Up to $450,000
  • Corporations/Financial Institutions/Insurance Companies: Up to $500,000 (or 75% of tax liability, whichever is less)
• Statewide Cap: The total aggregate tax credits for the state are capped annually:
  • $20 million for 2026
  • $25 million for 2027
  • $30 million for 2028 and subsequent years
• Hospital Eligibility: Hospitals must be in a federally designated rural area, serve Medicare, Medicaid, and indigent patients, and submit a five-year financial plan to the Rural Hospital Investment Program Board for approval. A list of eligible hospitals is published on the Alabama Department of Revenue website each December 1st.
• Usage of Funds: Hospitals can use the donations for operational expenditures, maintenance, capital upgrades, and improvements to provide healthcare services.
• Carry Forward: Any unused credit may be carried forward for up to three years. The credit is non-transferable. 

• Local Match Requirement: An eligible rural hospital must receive a local match equal to at least 10% of the assistance provided through the program from its local governing body (e.g., city council). This match can be in the form of direct tax revenue, budget appropriations, or in-kind services (in-kind services are capped at 5% of the total required match).
• Administration: The program is overseen by the Rural Hospital Investment Program Board within the Office of the State Treasurer, and donations are reserved and certified through the My Alabama Taxes system.

Preparing for Implementation

The Alabama Rural Hospital Investment Tax Credit offers individuals and businesses a unique opportunity to support rural healthcare while potentially offsetting state tax liabilities. Because the program includes specific eligibility requirements, credit limitations, and timing considerations, early planning is important. If you have questions about how this credit may apply to your situation or would like assistance evaluating participation, contact your CRI advisor to discuss the details and next steps. Proactive coordination can help ensure you are prepared to act when credit reservations become available.