diff --git a/app/Enums/LabelColor.php b/app/Enums/LabelColor.php
new file mode 100644
index 00000000..e74a6a3f
--- /dev/null
+++ b/app/Enums/LabelColor.php
@@ -0,0 +1,27 @@
+<?php
+
+namespace App\Enums;
+
+enum LabelColor: string
+{
+    case Amber = 'amber';
+    case Blue = 'blue';
+    case Cyan = 'cyan';
+    case Emerald = 'emerald';
+    case Fuchsia = 'fuchsia';
+    case Gray = 'gray';
+    case Green = 'green';
+    case Indigo = 'indigo';
+    case Lime = 'lime';
+    case Neutral = 'neutral';
+    case Orange = 'orange';
+    case Pink = 'pink';
+    case Purple = 'purple';
+    case Red = 'red';
+    case Rose = 'rose';
+    case Slate = 'slate';
+    case Stone = 'stone';
+    case Teal = 'teal';
+    case Violet = 'violet';
+    case Yellow = 'yellow';
+}
diff --git a/app/Http/Controllers/Settings/AutomationRuleController.php b/app/Http/Controllers/Settings/AutomationRuleController.php
index e722ca25..b8991ba6 100644
--- a/app/Http/Controllers/Settings/AutomationRuleController.php
+++ b/app/Http/Controllers/Settings/AutomationRuleController.php
@@ -22,7 +22,7 @@ class AutomationRuleController extends Controller
     {
         $rules = auth()->user()
             ->automationRules()
-            ->with('category:id,name,icon,color')
+            ->with(['category:id,name,icon,color', 'labels:id,name,color'])
             ->orderBy('priority')
             ->get(['id', 'title', 'priority', 'rules_json', 'action_category_id', 'action_note', 'action_note_iv']);
 
@@ -36,7 +36,15 @@ class AutomationRuleController extends Controller
      */
     public function store(StoreAutomationRuleRequest $request): RedirectResponse
     {
-        auth()->user()->automationRules()->create($request->validated());
+        $validated = $request->validated();
+        $labelIds = $validated['action_label_ids'] ?? [];
+        unset($validated['action_label_ids']);
+
+        $rule = auth()->user()->automationRules()->create($validated);
+
+        if (! empty($labelIds)) {
+            $rule->labels()->sync($labelIds);
+        }
 
         return back();
     }
@@ -48,7 +56,12 @@ class AutomationRuleController extends Controller
     {
         $this->authorize('update', $automationRule);
 
-        $automationRule->update($request->validated());
+        $validated = $request->validated();
+        $labelIds = $validated['action_label_ids'] ?? [];
+        unset($validated['action_label_ids']);
+
+        $automationRule->update($validated);
+        $automationRule->labels()->sync($labelIds);
 
         return back();
     }
diff --git a/app/Http/Controllers/Settings/LabelController.php b/app/Http/Controllers/Settings/LabelController.php
new file mode 100644
index 00000000..2e91deea
--- /dev/null
+++ b/app/Http/Controllers/Settings/LabelController.php
@@ -0,0 +1,71 @@
+<?php
+
+namespace App\Http\Controllers\Settings;
+
+use App\Http\Controllers\Controller;
+use App\Http\Requests\Settings\StoreLabelRequest;
+use App\Http\Requests\Settings\UpdateLabelRequest;
+use App\Models\Label;
+use Illuminate\Foundation\Auth\Access\AuthorizesRequests;
+use Illuminate\Http\JsonResponse;
+use Illuminate\Http\RedirectResponse;
+use Inertia\Inertia;
+use Inertia\Response;
+
+class LabelController extends Controller
+{
+    use AuthorizesRequests;
+
+    /**
+     * Show the user's labels settings page.
+     */
+    public function index(): Response
+    {
+        $labels = auth()->user()
+            ->labels()
+            ->orderBy('name')
+            ->get(['id', 'name', 'color']);
+
+        return Inertia::render('settings/labels', [
+            'labels' => $labels,
+        ]);
+    }
+
+    /**
+     * Store a newly created label.
+     */
+    public function store(StoreLabelRequest $request): JsonResponse|RedirectResponse
+    {
+        $label = auth()->user()->labels()->create($request->validated());
+
+        if ($request->expectsJson()) {
+            return response()->json(['data' => $label], 201);
+        }
+
+        return to_route('labels.index');
+    }
+
+    /**
+     * Update the specified label.
+     */
+    public function update(UpdateLabelRequest $request, Label $label): RedirectResponse
+    {
+        $this->authorize('update', $label);
+
+        $label->update($request->validated());
+
+        return to_route('labels.index');
+    }
+
+    /**
+     * Soft delete the specified label.
+     */
+    public function destroy(Label $label): RedirectResponse
+    {
+        $this->authorize('delete', $label);
+
+        $label->delete();
+
+        return to_route('labels.index');
+    }
+}
diff --git a/app/Http/Controllers/Sync/AutomationRuleSyncController.php b/app/Http/Controllers/Sync/AutomationRuleSyncController.php
index 5121ff51..a56741fd 100644
--- a/app/Http/Controllers/Sync/AutomationRuleSyncController.php
+++ b/app/Http/Controllers/Sync/AutomationRuleSyncController.php
@@ -14,7 +14,7 @@ class AutomationRuleSyncController extends Controller
     {
         $rules = auth()->user()
             ->automationRules()
-            ->with('category:id,name,icon,color')
+            ->with(['category:id,name,icon,color', 'labels:id,name,color'])
             ->orderBy('priority')
             ->get();
 
diff --git a/app/Http/Controllers/Sync/LabelSyncController.php b/app/Http/Controllers/Sync/LabelSyncController.php
new file mode 100644
index 00000000..8ad10421
--- /dev/null
+++ b/app/Http/Controllers/Sync/LabelSyncController.php
@@ -0,0 +1,26 @@
+<?php
+
+namespace App\Http\Controllers\Sync;
+
+use App\Http\Controllers\Controller;
+use App\Models\Label;
+use Illuminate\Http\JsonResponse;
+use Illuminate\Http\Request;
+
+class LabelSyncController extends Controller
+{
+    public function index(Request $request): JsonResponse
+    {
+        $query = Label::query()->where('user_id', $request->user()->id);
+
+        if ($request->has('since')) {
+            $query->where('updated_at', '>', $request->input('since'));
+        }
+
+        $labels = $query->orderBy('name', 'asc')->get();
+
+        return response()->json([
+            'data' => $labels,
+        ]);
+    }
+}
diff --git a/app/Http/Controllers/Sync/TransactionSyncController.php b/app/Http/Controllers/Sync/TransactionSyncController.php
index c2c33935..537f585b 100644
--- a/app/Http/Controllers/Sync/TransactionSyncController.php
+++ b/app/Http/Controllers/Sync/TransactionSyncController.php
@@ -20,6 +20,7 @@ class TransactionSyncController extends Controller
         }
 
         $transactions = $query
+            ->with('labels:id,name,color')
             ->orderBy('transaction_date', 'desc')
             ->orderBy('updated_at', 'desc')
             ->get();
@@ -32,6 +33,8 @@ class TransactionSyncController extends Controller
     public function store(StoreTransactionRequest $request): JsonResponse
     {
         $data = $request->validated();
+        $labelIds = $data['label_ids'] ?? [];
+        unset($data['label_ids']);
 
         // Create transaction with provided ID if available
         $transaction = new Transaction([
@@ -47,8 +50,12 @@ class TransactionSyncController extends Controller
 
         $transaction->save();
 
+        if (! empty($labelIds)) {
+            $transaction->labels()->sync($labelIds);
+        }
+
         return response()->json([
-            'data' => $transaction,
+            'data' => $transaction->load('labels:id,name,color'),
         ], 201);
     }
 
@@ -62,10 +69,17 @@ class TransactionSyncController extends Controller
         $data = $request->validated();
         unset($data['id']); // Don't allow ID changes
 
+        $labelIds = $data['label_ids'] ?? null;
+        unset($data['label_ids']);
+
         $transaction->update($data);
 
+        if ($labelIds !== null) {
+            $transaction->labels()->sync($labelIds);
+        }
+
         return response()->json([
-            'data' => $transaction->fresh(),
+            'data' => $transaction->fresh()->load('labels:id,name,color'),
         ]);
     }
 
diff --git a/app/Http/Controllers/TransactionController.php b/app/Http/Controllers/TransactionController.php
index 27ab2bdb..c52062ba 100644
--- a/app/Http/Controllers/TransactionController.php
+++ b/app/Http/Controllers/TransactionController.php
@@ -8,6 +8,7 @@ use App\Http\Requests\UpdateTransactionRequest;
 use App\Models\Account;
 use App\Models\Bank;
 use App\Models\Category;
+use App\Models\Label;
 use App\Models\Transaction;
 use Illuminate\Foundation\Auth\Access\AuthorizesRequests;
 use Illuminate\Http\JsonResponse;
@@ -42,10 +43,16 @@ class TransactionController extends Controller
             ->orderBy('name')
             ->get(['id', 'name', 'logo']);
 
+        $labels = Label::query()
+            ->where('user_id', $user->id)
+            ->orderBy('name')
+            ->get(['id', 'name', 'color']);
+
         return Inertia::render('transactions/index', [
             'categories' => $categories,
             'accounts' => $accounts,
             'banks' => $banks,
+            'labels' => $labels,
         ]);
     }
 
@@ -72,10 +79,16 @@ class TransactionController extends Controller
             ->orderBy('name')
             ->get(['id', 'name', 'logo']);
 
+        $labels = Label::query()
+            ->where('user_id', $user->id)
+            ->orderBy('name')
+            ->get(['id', 'name', 'color']);
+
         return Inertia::render('transactions/categorize', [
             'categories' => $categories,
             'accounts' => $accounts,
             'banks' => $banks,
+            'labels' => $labels,
         ]);
     }
 
@@ -149,16 +162,27 @@ class TransactionController extends Controller
             $updateData['notes_iv'] = $request->input('notes_iv');
         }
 
-        if (empty($updateData)) {
+        $labelIds = $request->input('label_ids');
+        $hasLabelUpdate = $request->has('label_ids');
+
+        if (empty($updateData) && ! $hasLabelUpdate) {
             return response()->json([
                 'message' => 'No update data provided.',
             ], 400);
         }
 
-        Transaction::query()
-            ->whereIn('id', $transactionIds)
-            ->where('user_id', $user->id)
-            ->update($updateData);
+        if (! empty($updateData)) {
+            Transaction::query()
+                ->whereIn('id', $transactionIds)
+                ->where('user_id', $user->id)
+                ->update($updateData);
+        }
+
+        if ($hasLabelUpdate) {
+            foreach ($transactions as $transaction) {
+                $transaction->labels()->sync($labelIds ?? []);
+            }
+        }
 
         return response()->json([
             'message' => 'Transactions updated successfully',
diff --git a/app/Http/Requests/BulkUpdateTransactionsRequest.php b/app/Http/Requests/BulkUpdateTransactionsRequest.php
index 5738f6f6..c59ae390 100644
--- a/app/Http/Requests/BulkUpdateTransactionsRequest.php
+++ b/app/Http/Requests/BulkUpdateTransactionsRequest.php
@@ -19,6 +19,8 @@ class BulkUpdateTransactionsRequest extends FormRequest
             'category_id' => ['nullable', 'exists:categories,id'],
             'notes' => ['nullable', 'string'],
             'notes_iv' => ['nullable', 'string', 'size:16'],
+            'label_ids' => ['nullable', 'array'],
+            'label_ids.*' => ['required', 'string', 'uuid', 'exists:labels,id'],
         ];
     }
 
diff --git a/app/Http/Requests/Settings/StoreAutomationRuleRequest.php b/app/Http/Requests/Settings/StoreAutomationRuleRequest.php
index e05b5c62..ae75e43a 100644
--- a/app/Http/Requests/Settings/StoreAutomationRuleRequest.php
+++ b/app/Http/Requests/Settings/StoreAutomationRuleRequest.php
@@ -41,6 +41,15 @@ class StoreAutomationRuleRequest extends FormRequest
             ],
             'action_note' => ['nullable', 'string'],
             'action_note_iv' => ['nullable', 'string', 'required_with:action_note'],
+            'action_label_ids' => ['nullable', 'array'],
+            'action_label_ids.*' => [
+                'required',
+                'string',
+                'uuid',
+                Rule::exists('labels', 'id')->where(function ($query) {
+                    $query->where('user_id', auth()->id());
+                }),
+            ],
         ];
     }
 
@@ -50,8 +59,9 @@ class StoreAutomationRuleRequest extends FormRequest
     public function withValidator($validator): void
     {
         $validator->after(function ($validator) {
-            if (! $this->action_category_id && ! $this->action_note) {
-                $validator->errors()->add('action_category_id', 'At least one action (category or note) must be provided.');
+            $hasLabels = ! empty($this->action_label_ids);
+            if (! $this->action_category_id && ! $this->action_note && ! $hasLabels) {
+                $validator->errors()->add('action_category_id', 'At least one action (category, note, or labels) must be provided.');
             }
         });
     }
diff --git a/app/Http/Requests/Settings/StoreLabelRequest.php b/app/Http/Requests/Settings/StoreLabelRequest.php
new file mode 100644
index 00000000..659a5558
--- /dev/null
+++ b/app/Http/Requests/Settings/StoreLabelRequest.php
@@ -0,0 +1,43 @@
+<?php
+
+namespace App\Http\Requests\Settings;
+
+use App\Enums\LabelColor;
+use Illuminate\Contracts\Validation\ValidationRule;
+use Illuminate\Foundation\Http\FormRequest;
+use Illuminate\Validation\Rule;
+
+class StoreLabelRequest extends FormRequest
+{
+    /**
+     * Determine if the user is authorized to make this request.
+     */
+    public function authorize(): bool
+    {
+        return true;
+    }
+
+    /**
+     * Get the validation rules that apply to the request.
+     *
+     * @return array<string, ValidationRule|array<mixed>|string>
+     */
+    public function rules(): array
+    {
+        return [
+            'name' => [
+                'required',
+                'string',
+                'max:255',
+                Rule::unique('labels', 'name')
+                    ->where('user_id', auth()->id())
+                    ->whereNull('deleted_at'),
+            ],
+            'color' => [
+                'required',
+                'string',
+                Rule::enum(LabelColor::class),
+            ],
+        ];
+    }
+}
diff --git a/app/Http/Requests/Settings/UpdateAutomationRuleRequest.php b/app/Http/Requests/Settings/UpdateAutomationRuleRequest.php
index ed27d67e..2d605817 100644
--- a/app/Http/Requests/Settings/UpdateAutomationRuleRequest.php
+++ b/app/Http/Requests/Settings/UpdateAutomationRuleRequest.php
@@ -41,6 +41,15 @@ class UpdateAutomationRuleRequest extends FormRequest
             ],
             'action_note' => ['nullable', 'string'],
             'action_note_iv' => ['nullable', 'string', 'required_with:action_note'],
+            'action_label_ids' => ['nullable', 'array'],
+            'action_label_ids.*' => [
+                'required',
+                'string',
+                'uuid',
+                Rule::exists('labels', 'id')->where(function ($query) {
+                    $query->where('user_id', auth()->id());
+                }),
+            ],
         ];
     }
 
@@ -50,8 +59,9 @@ class UpdateAutomationRuleRequest extends FormRequest
     public function withValidator($validator): void
     {
         $validator->after(function ($validator) {
-            if (! $this->action_category_id && ! $this->action_note) {
-                $validator->errors()->add('action_category_id', 'At least one action (category or note) must be provided.');
+            $hasLabels = ! empty($this->action_label_ids);
+            if (! $this->action_category_id && ! $this->action_note && ! $hasLabels) {
+                $validator->errors()->add('action_category_id', 'At least one action (category, note, or labels) must be provided.');
             }
         });
     }
diff --git a/app/Http/Requests/Settings/UpdateLabelRequest.php b/app/Http/Requests/Settings/UpdateLabelRequest.php
new file mode 100644
index 00000000..f0b5e48e
--- /dev/null
+++ b/app/Http/Requests/Settings/UpdateLabelRequest.php
@@ -0,0 +1,46 @@
+<?php
+
+namespace App\Http\Requests\Settings;
+
+use App\Enums\LabelColor;
+use Illuminate\Contracts\Validation\ValidationRule;
+use Illuminate\Foundation\Http\FormRequest;
+use Illuminate\Validation\Rule;
+
+class UpdateLabelRequest extends FormRequest
+{
+    /**
+     * Determine if the user is authorized to make this request.
+     */
+    public function authorize(): bool
+    {
+        return true;
+    }
+
+    /**
+     * Get the validation rules that apply to the request.
+     *
+     * @return array<string, ValidationRule|array<mixed>|string>
+     */
+    public function rules(): array
+    {
+        return [
+            'name' => [
+                'sometimes',
+                'required',
+                'string',
+                'max:255',
+                Rule::unique('labels', 'name')
+                    ->where('user_id', auth()->id())
+                    ->whereNull('deleted_at')
+                    ->ignore($this->route('label')),
+            ],
+            'color' => [
+                'sometimes',
+                'required',
+                'string',
+                Rule::enum(LabelColor::class),
+            ],
+        ];
+    }
+}
diff --git a/app/Http/Requests/StoreTransactionRequest.php b/app/Http/Requests/StoreTransactionRequest.php
index 5538b1b2..764aae12 100644
--- a/app/Http/Requests/StoreTransactionRequest.php
+++ b/app/Http/Requests/StoreTransactionRequest.php
@@ -27,6 +27,8 @@ class StoreTransactionRequest extends FormRequest
             'notes' => ['nullable', 'string'],
             'notes_iv' => ['nullable', 'string', 'size:16'],
             'source' => ['required', Rule::enum(TransactionSource::class)],
+            'label_ids' => ['nullable', 'array'],
+            'label_ids.*' => ['string', 'uuid', 'exists:labels,id'],
         ];
     }
 
diff --git a/app/Models/AutomationRule.php b/app/Models/AutomationRule.php
index 5720e6bc..faefea94 100644
--- a/app/Models/AutomationRule.php
+++ b/app/Models/AutomationRule.php
@@ -6,6 +6,7 @@ use Illuminate\Database\Eloquent\Concerns\HasUuids;
 use Illuminate\Database\Eloquent\Factories\HasFactory;
 use Illuminate\Database\Eloquent\Model;
 use Illuminate\Database\Eloquent\Relations\BelongsTo;
+use Illuminate\Database\Eloquent\Relations\BelongsToMany;
 use Illuminate\Database\Eloquent\SoftDeletes;
 
 class AutomationRule extends Model
@@ -40,4 +41,10 @@ class AutomationRule extends Model
     {
         return $this->belongsTo(Category::class, 'action_category_id');
     }
+
+    public function labels(): BelongsToMany
+    {
+        return $this->belongsToMany(Label::class, 'automation_rule_labels')
+            ->using(AutomationRuleLabel::class);
+    }
 }
diff --git a/app/Models/AutomationRuleLabel.php b/app/Models/AutomationRuleLabel.php
new file mode 100644
index 00000000..fdafacea
--- /dev/null
+++ b/app/Models/AutomationRuleLabel.php
@@ -0,0 +1,17 @@
+<?php
+
+namespace App\Models;
+
+use Illuminate\Database\Eloquent\Concerns\HasUuids;
+use Illuminate\Database\Eloquent\Relations\Pivot;
+
+class AutomationRuleLabel extends Pivot
+{
+    use HasUuids;
+
+    protected $table = 'automation_rule_labels';
+
+    public $incrementing = false;
+
+    protected $keyType = 'string';
+}
diff --git a/app/Models/Label.php b/app/Models/Label.php
new file mode 100644
index 00000000..5c8847fd
--- /dev/null
+++ b/app/Models/Label.php
@@ -0,0 +1,40 @@
+<?php
+
+namespace App\Models;
+
+use Illuminate\Database\Eloquent\Concerns\HasUuids;
+use Illuminate\Database\Eloquent\Factories\HasFactory;
+use Illuminate\Database\Eloquent\Model;
+use Illuminate\Database\Eloquent\Relations\BelongsTo;
+use Illuminate\Database\Eloquent\Relations\BelongsToMany;
+use Illuminate\Database\Eloquent\SoftDeletes;
+
+class Label extends Model
+{
+    /** @use HasFactory<\Database\Factories\LabelFactory> */
+    use HasFactory, HasUuids, SoftDeletes;
+
+    protected $fillable = [
+        'name',
+        'color',
+        'user_id',
+    ];
+
+    public function user(): BelongsTo
+    {
+        return $this->belongsTo(User::class);
+    }
+
+    public function transactions(): BelongsToMany
+    {
+        return $this->belongsToMany(Transaction::class)
+            ->using(LabelTransaction::class)
+            ->withTimestamps();
+    }
+
+    public function automationRules(): BelongsToMany
+    {
+        return $this->belongsToMany(AutomationRule::class, 'automation_rule_labels')
+            ->using(AutomationRuleLabel::class);
+    }
+}
diff --git a/app/Models/LabelTransaction.php b/app/Models/LabelTransaction.php
new file mode 100644
index 00000000..c563b8d2
--- /dev/null
+++ b/app/Models/LabelTransaction.php
@@ -0,0 +1,17 @@
+<?php
+
+namespace App\Models;
+
+use Illuminate\Database\Eloquent\Concerns\HasUuids;
+use Illuminate\Database\Eloquent\Relations\Pivot;
+
+class LabelTransaction extends Pivot
+{
+    use HasUuids;
+
+    protected $table = 'label_transaction';
+
+    public $incrementing = false;
+
+    protected $keyType = 'string';
+}
diff --git a/app/Models/Transaction.php b/app/Models/Transaction.php
index bedd7889..aa22ac9e 100644
--- a/app/Models/Transaction.php
+++ b/app/Models/Transaction.php
@@ -7,6 +7,7 @@ use Illuminate\Database\Eloquent\Concerns\HasUuids;
 use Illuminate\Database\Eloquent\Factories\HasFactory;
 use Illuminate\Database\Eloquent\Model;
 use Illuminate\Database\Eloquent\Relations\BelongsTo;
+use Illuminate\Database\Eloquent\Relations\BelongsToMany;
 use Illuminate\Database\Eloquent\SoftDeletes;
 
 class Transaction extends Model
@@ -51,4 +52,11 @@ class Transaction extends Model
     {
         return $this->belongsTo(Category::class);
     }
+
+    public function labels(): BelongsToMany
+    {
+        return $this->belongsToMany(Label::class)
+            ->using(LabelTransaction::class)
+            ->withTimestamps();
+    }
 }
diff --git a/app/Models/User.php b/app/Models/User.php
index 131f382d..75ae5fc3 100644
--- a/app/Models/User.php
+++ b/app/Models/User.php
@@ -87,6 +87,11 @@ class User extends Authenticatable
         return $this->hasMany(AutomationRule::class);
     }
 
+    public function labels(): HasMany
+    {
+        return $this->hasMany(Label::class);
+    }
+
     public function hasProPlan(): bool
     {
         if (! config('subscriptions.enabled')) {
diff --git a/app/Policies/LabelPolicy.php b/app/Policies/LabelPolicy.php
new file mode 100644
index 00000000..98403610
--- /dev/null
+++ b/app/Policies/LabelPolicy.php
@@ -0,0 +1,65 @@
+<?php
+
+namespace App\Policies;
+
+use App\Models\Label;
+use App\Models\User;
+
+class LabelPolicy
+{
+    /**
+     * Determine whether the user can view any models.
+     */
+    public function viewAny(User $user): bool
+    {
+        return false;
+    }
+
+    /**
+     * Determine whether the user can view the model.
+     */
+    public function view(User $user, Label $label): bool
+    {
+        return false;
+    }
+
+    /**
+     * Determine whether the user can create models.
+     */
+    public function create(User $user): bool
+    {
+        return false;
+    }
+
+    /**
+     * Determine whether the user can update the model.
+     */
+    public function update(User $user, Label $label): bool
+    {
+        return $user->id === $label->user_id;
+    }
+
+    /**
+     * Determine whether the user can delete the model.
+     */
+    public function delete(User $user, Label $label): bool
+    {
+        return $user->id === $label->user_id;
+    }
+
+    /**
+     * Determine whether the user can restore the model.
+     */
+    public function restore(User $user, Label $label): bool
+    {
+        return false;
+    }
+
+    /**
+     * Determine whether the user can permanently delete the model.
+     */
+    public function forceDelete(User $user, Label $label): bool
+    {
+        return false;
+    }
+}
diff --git a/database/factories/LabelFactory.php b/database/factories/LabelFactory.php
new file mode 100644
index 00000000..08656762
--- /dev/null
+++ b/database/factories/LabelFactory.php
@@ -0,0 +1,26 @@
+<?php
+
+namespace Database\Factories;
+
+use App\Models\User;
+use Illuminate\Database\Eloquent\Factories\Factory;
+
+/**
+ * @extends \Illuminate\Database\Eloquent\Factories\Factory<\App\Models\Label>
+ */
+class LabelFactory extends Factory
+{
+    /**
+     * Define the model's default state.
+     *
+     * @return array<string, mixed>
+     */
+    public function definition(): array
+    {
+        return [
+            'name' => fake()->unique()->word(),
+            'color' => fake()->randomElement(['amber', 'blue', 'cyan', 'emerald', 'gray', 'green', 'indigo', 'orange', 'pink', 'purple', 'red', 'slate', 'teal', 'yellow']),
+            'user_id' => User::factory(),
+        ];
+    }
+}
diff --git a/database/migrations/2025_12_12_092647_create_labels_table.php b/database/migrations/2025_12_12_092647_create_labels_table.php
new file mode 100644
index 00000000..cccb5f0a
--- /dev/null
+++ b/database/migrations/2025_12_12_092647_create_labels_table.php
@@ -0,0 +1,33 @@
+<?php
+
+use Illuminate\Database\Migrations\Migration;
+use Illuminate\Database\Schema\Blueprint;
+use Illuminate\Support\Facades\Schema;
+
+return new class extends Migration
+{
+    /**
+     * Run the migrations.
+     */
+    public function up(): void
+    {
+        Schema::create('labels', function (Blueprint $table) {
+            $table->uuid('id')->primary();
+            $table->foreignUuid('user_id')->constrained()->cascadeOnDelete();
+            $table->string('name');
+            $table->string('color', 50);
+            $table->timestamps();
+            $table->softDeletes();
+
+            $table->unique(['user_id', 'name']);
+        });
+    }
+
+    /**
+     * Reverse the migrations.
+     */
+    public function down(): void
+    {
+        Schema::dropIfExists('labels');
+    }
+};
diff --git a/database/migrations/2025_12_12_092650_create_label_transaction_table.php b/database/migrations/2025_12_12_092650_create_label_transaction_table.php
new file mode 100644
index 00000000..0ffaaff8
--- /dev/null
+++ b/database/migrations/2025_12_12_092650_create_label_transaction_table.php
@@ -0,0 +1,31 @@
+<?php
+
+use Illuminate\Database\Migrations\Migration;
+use Illuminate\Database\Schema\Blueprint;
+use Illuminate\Support\Facades\Schema;
+
+return new class extends Migration
+{
+    /**
+     * Run the migrations.
+     */
+    public function up(): void
+    {
+        Schema::create('label_transaction', function (Blueprint $table) {
+            $table->uuid('id')->primary();
+            $table->foreignUuid('label_id')->constrained()->cascadeOnDelete();
+            $table->foreignUuid('transaction_id')->constrained()->cascadeOnDelete();
+            $table->timestamps();
+
+            $table->unique(['label_id', 'transaction_id']);
+        });
+    }
+
+    /**
+     * Reverse the migrations.
+     */
+    public function down(): void
+    {
+        Schema::dropIfExists('label_transaction');
+    }
+};
diff --git a/database/migrations/2025_12_12_092651_create_automation_rule_labels_table.php b/database/migrations/2025_12_12_092651_create_automation_rule_labels_table.php
new file mode 100644
index 00000000..bfb2e4be
--- /dev/null
+++ b/database/migrations/2025_12_12_092651_create_automation_rule_labels_table.php
@@ -0,0 +1,30 @@
+<?php
+
+use Illuminate\Database\Migrations\Migration;
+use Illuminate\Database\Schema\Blueprint;
+use Illuminate\Support\Facades\Schema;
+
+return new class extends Migration
+{
+    /**
+     * Run the migrations.
+     */
+    public function up(): void
+    {
+        Schema::create('automation_rule_labels', function (Blueprint $table) {
+            $table->uuid('id')->primary();
+            $table->foreignUuid('automation_rule_id')->constrained()->cascadeOnDelete();
+            $table->foreignUuid('label_id')->constrained()->cascadeOnDelete();
+
+            $table->unique(['automation_rule_id', 'label_id']);
+        });
+    }
+
+    /**
+     * Reverse the migrations.
+     */
+    public function down(): void
+    {
+        Schema::dropIfExists('automation_rule_labels');
+    }
+};
diff --git a/database/migrations/2025_12_12_141955_update_labels_unique_constraint_include_deleted_at.php b/database/migrations/2025_12_12_141955_update_labels_unique_constraint_include_deleted_at.php
new file mode 100644
index 00000000..dded1998
--- /dev/null
+++ b/database/migrations/2025_12_12_141955_update_labels_unique_constraint_include_deleted_at.php
@@ -0,0 +1,34 @@
+<?php
+
+use Illuminate\Database\Migrations\Migration;
+use Illuminate\Database\Schema\Blueprint;
+use Illuminate\Support\Facades\Schema;
+
+return new class extends Migration
+{
+    /**
+     * Run the migrations.
+     */
+    public function up(): void
+    {
+        Schema::table('labels', function (Blueprint $table) {
+            $table->dropForeign(['user_id']);
+            $table->dropUnique(['user_id', 'name']);
+            $table->unique(['user_id', 'name', 'deleted_at']);
+            $table->foreign('user_id')->references('id')->on('users')->cascadeOnDelete();
+        });
+    }
+
+    /**
+     * Reverse the migrations.
+     */
+    public function down(): void
+    {
+        Schema::table('labels', function (Blueprint $table) {
+            $table->dropForeign(['user_id']);
+            $table->dropUnique(['user_id', 'name', 'deleted_at']);
+            $table->unique(['user_id', 'name']);
+            $table->foreign('user_id')->references('id')->on('users')->cascadeOnDelete();
+        });
+    }
+};
diff --git a/resources/js/components/automation-rules/create-automation-rule-dialog.tsx b/resources/js/components/automation-rules/create-automation-rule-dialog.tsx
index fedf3ddd..fa3fd4d3 100644
--- a/resources/js/components/automation-rules/create-automation-rule-dialog.tsx
+++ b/resources/js/components/automation-rules/create-automation-rule-dialog.tsx
@@ -1,6 +1,7 @@
 import { store } from '@/actions/App/Http/Controllers/Settings/AutomationRuleController';
 import { RuleBuilder } from '@/components/automation-rules/rule-builder';
 import { CategoryCombobox } from '@/components/shared/category-combobox';
+import { LabelCombobox } from '@/components/shared/label-combobox';
 import { Button } from '@/components/ui/button';
 import {
     Dialog,
@@ -11,7 +12,7 @@ import {
     DialogTrigger,
 } from '@/components/ui/dialog';
 import { Input } from '@/components/ui/input';
-import { Label } from '@/components/ui/label';
+import { Label as FormLabel } from '@/components/ui/label';
 import { Textarea } from '@/components/ui/textarea';
 import { encrypt, importKey } from '@/lib/crypto';
 import { getStoredKey } from '@/lib/key-storage';
@@ -23,7 +24,9 @@ import {
 } from '@/lib/rule-builder-utils';
 import { automationRuleSyncService } from '@/services/automation-rule-sync';
 import { categorySyncService } from '@/services/category-sync';
+import { labelSyncService } from '@/services/label-sync';
 import type { Category } from '@/types/category';
+import type { Label } from '@/types/label';
 import { router } from '@inertiajs/react';
 import { useEffect, useState } from 'react';
 
@@ -38,6 +41,7 @@ export function CreateAutomationRuleDialog({
 }: CreateAutomationRuleDialogProps) {
     const [open, setOpen] = useState(false);
     const [categories, setCategories] = useState<Category[]>([]);
+    const [labels, setLabels] = useState<Label[]>([]);
     const [title, setTitle] = useState('');
     const [priority, setPriority] = useState('10');
     const [ruleStructure, setRuleStructure] = useState<RuleStructure>({
@@ -45,16 +49,21 @@ export function CreateAutomationRuleDialog({
         groupOperator: 'or',
     });
     const [categoryId, setCategoryId] = useState<string>('');
+    const [selectedLabelIds, setSelectedLabelIds] = useState<string[]>([]);
     const [note, setNote] = useState('');
     const [isSubmitting, setIsSubmitting] = useState(false);
     const [errors, setErrors] = useState<Record<string, string>>({});
 
     useEffect(() => {
-        const loadCategories = async () => {
-            const data = await categorySyncService.getAll();
-            setCategories(data);
+        const loadData = async () => {
+            const [categoriesData, labelsData] = await Promise.all([
+                categorySyncService.getAll(),
+                labelSyncService.getAll(),
+            ]);
+            setCategories(categoriesData);
+            setLabels(labelsData);
         };
-        loadCategories();
+        loadData();
     }, []);
 
     const handleSubmit = async (e: React.FormEvent) => {
@@ -74,7 +83,7 @@ export function CreateAutomationRuleDialog({
             return;
         }
 
-        if (!categoryId && !note.trim()) {
+        if (!categoryId && !note.trim() && selectedLabelIds.length === 0) {
             setErrors((prev) => ({
                 ...prev,
                 action_category_id: 'At least one action is required',
@@ -110,6 +119,8 @@ export function CreateAutomationRuleDialog({
                     action_category_id: categoryId || null,
                     action_note: encryptedNote,
                     action_note_iv: noteIv,
+                    action_label_ids:
+                        selectedLabelIds.length > 0 ? selectedLabelIds : null,
                 },
                 {
                     preserveState: true,
@@ -123,6 +134,7 @@ export function CreateAutomationRuleDialog({
                             groupOperator: 'and',
                         });
                         setCategoryId('');
+                        setSelectedLabelIds([]);
                         setNote('');
                         setErrors({});
                         await automationRuleSyncService.sync();
@@ -157,7 +169,7 @@ export function CreateAutomationRuleDialog({
                 </DialogHeader>
                 <form onSubmit={handleSubmit} className="space-y-4">
                     <div className="space-y-2">
-                        <Label htmlFor="title">Title</Label>
+                        <FormLabel htmlFor="title">Title</FormLabel>
                         <Input
                             id="title"
                             value={title}
@@ -173,7 +185,7 @@ export function CreateAutomationRuleDialog({
                     </div>
 
                     <div className="space-y-2">
-                        <Label htmlFor="priority">Priority</Label>
+                        <FormLabel htmlFor="priority">Priority</FormLabel>
                         <Input
                             id="priority"
                             type="number"
@@ -206,7 +218,9 @@ export function CreateAutomationRuleDialog({
                         </p>
 
                         <div className="space-y-2">
-                            <Label htmlFor="category">Set Category</Label>
+                            <FormLabel htmlFor="category">
+                                Set Category
+                            </FormLabel>
                             <CategoryCombobox
                                 value={categoryId}
                                 onValueChange={setCategoryId}
@@ -217,7 +231,19 @@ export function CreateAutomationRuleDialog({
                         </div>
 
                         <div className="space-y-2">
-                            <Label htmlFor="note">Add Note</Label>
+                            <FormLabel>Add Labels</FormLabel>
+                            <LabelCombobox
+                                value={selectedLabelIds}
+                                onValueChange={setSelectedLabelIds}
+                                labels={labels}
+                                onLabelsChange={setLabels}
+                                placeholder="Select labels (optional)"
+                                allowCreate={true}
+                            />
+                        </div>
+
+                        <div className="space-y-2">
+                            <FormLabel htmlFor="note">Add Note</FormLabel>
                             <Textarea
                                 id="note"
                                 value={note}
diff --git a/resources/js/components/labels/create-label-dialog.tsx b/resources/js/components/labels/create-label-dialog.tsx
new file mode 100644
index 00000000..cacff277
--- /dev/null
+++ b/resources/js/components/labels/create-label-dialog.tsx
@@ -0,0 +1,120 @@
+import { store } from '@/actions/App/Http/Controllers/Settings/LabelController';
+import { Badge } from '@/components/ui/badge';
+import { Button } from '@/components/ui/button';
+import {
+    Dialog,
+    DialogContent,
+    DialogDescription,
+    DialogHeader,
+    DialogTitle,
+    DialogTrigger,
+} from '@/components/ui/dialog';
+import { Input } from '@/components/ui/input';
+import { Label } from '@/components/ui/label';
+import {
+    Select,
+    SelectContent,
+    SelectItem,
+    SelectTrigger,
+    SelectValue,
+} from '@/components/ui/select';
+import { labelSyncService } from '@/services/label-sync';
+import { getLabelColorClasses, LABEL_COLORS } from '@/types/label';
+import { Form } from '@inertiajs/react';
+import { useState } from 'react';
+
+export function CreateLabelDialog({ onSuccess }: { onSuccess?: () => void }) {
+    const [open, setOpen] = useState(false);
+
+    return (
+        <Dialog open={open} onOpenChange={setOpen}>
+            <DialogTrigger asChild>
+                <Button>Create Label</Button>
+            </DialogTrigger>
+            <DialogContent className="sm:max-w-[425px]">
+                <DialogHeader>
+                    <DialogTitle>Create Label</DialogTitle>
+                    <DialogDescription>
+                        Add a new label to tag your transactions.
+                    </DialogDescription>
+                </DialogHeader>
+                <Form
+                    {...store.form()}
+                    onSuccess={async () => {
+                        await labelSyncService.sync();
+                        setOpen(false);
+                        onSuccess?.();
+                    }}
+                    className="space-y-4"
+                >
+                    {({ errors, processing }) => (
+                        <>
+                            <div className="space-y-2">
+                                <Label htmlFor="name">Name</Label>
+                                <Input
+                                    id="name"
+                                    name="name"
+                                    placeholder="Label name"
+                                    required
+                                />
+                                {errors.name && (
+                                    <p className="text-sm text-red-500">
+                                        {errors.name}
+                                    </p>
+                                )}
+                            </div>
+
+                            <div className="space-y-2">
+                                <Label htmlFor="color">Color</Label>
+                                <Select name="color" required>
+                                    <SelectTrigger>
+                                        <SelectValue placeholder="Select a color" />
+                                    </SelectTrigger>
+                                    <SelectContent>
+                                        {LABEL_COLORS.map((color) => {
+                                            const colorClasses =
+                                                getLabelColorClasses(color);
+                                            return (
+                                                <SelectItem
+                                                    key={color}
+                                                    value={color}
+                                                >
+                                                    <div className="flex items-center gap-2">
+                                                        <Badge
+                                                            className={`${colorClasses.bg} ${colorClasses.text}`}
+                                                        >
+                                                            {color}
+                                                        </Badge>
+                                                    </div>
+                                                </SelectItem>
+                                            );
+                                        })}
+                                    </SelectContent>
+                                </Select>
+                                {errors.color && (
+                                    <p className="text-sm text-red-500">
+                                        {errors.color}
+                                    </p>
+                                )}
+                            </div>
+
+                            <div className="flex justify-end gap-2">
+                                <Button
+                                    type="button"
+                                    variant="outline"
+                                    onClick={() => setOpen(false)}
+                                    disabled={processing}
+                                >
+                                    Cancel
+                                </Button>
+                                <Button type="submit" disabled={processing}>
+                                    {processing ? 'Creating...' : 'Create'}
+                                </Button>
+                            </div>
+                        </>
+                    )}
+                </Form>
+            </DialogContent>
+        </Dialog>
+    );
+}
diff --git a/resources/js/components/labels/delete-label-dialog.tsx b/resources/js/components/labels/delete-label-dialog.tsx
new file mode 100644
index 00000000..e23920f8
--- /dev/null
+++ b/resources/js/components/labels/delete-label-dialog.tsx
@@ -0,0 +1,69 @@
+import { destroy } from '@/actions/App/Http/Controllers/Settings/LabelController';
+import { Button } from '@/components/ui/button';
+import {
+    Dialog,
+    DialogContent,
+    DialogDescription,
+    DialogFooter,
+    DialogHeader,
+    DialogTitle,
+} from '@/components/ui/dialog';
+import { labelSyncService } from '@/services/label-sync';
+import { type Label } from '@/types/label';
+import { Form } from '@inertiajs/react';
+
+interface DeleteLabelDialogProps {
+    label: Label;
+    open: boolean;
+    onOpenChange: (open: boolean) => void;
+    onSuccess?: () => void;
+}
+
+export function DeleteLabelDialog({
+    label,
+    open,
+    onOpenChange,
+    onSuccess,
+}: DeleteLabelDialogProps) {
+    return (
+        <Dialog open={open} onOpenChange={onOpenChange}>
+            <DialogContent className="sm:max-w-[425px]">
+                <DialogHeader>
+                    <DialogTitle>Delete Label</DialogTitle>
+                    <DialogDescription>
+                        Are you sure you want to delete "{label.name}"? This
+                        action cannot be undone.
+                    </DialogDescription>
+                </DialogHeader>
+                <Form
+                    {...destroy.form.delete(label.id)}
+                    onSuccess={async () => {
+                        await labelSyncService.delete(label.id);
+                        onOpenChange(false);
+                        onSuccess?.();
+                    }}
+                >
+                    {({ processing }) => (
+                        <DialogFooter>
+                            <Button
+                                type="button"
+                                variant="outline"
+                                onClick={() => onOpenChange(false)}
+                                disabled={processing}
+                            >
+                                Cancel
+                            </Button>
+                            <Button
+                                type="submit"
+                                variant="destructive"
+                                disabled={processing}
+                            >
+                                {processing ? 'Deleting...' : 'Delete'}
+                            </Button>
+                        </DialogFooter>
+                    )}
+                </Form>
+            </DialogContent>
+        </Dialog>
+    );
+}
diff --git a/resources/js/components/labels/edit-label-dialog.tsx b/resources/js/components/labels/edit-label-dialog.tsx
new file mode 100644
index 00000000..7200bc42
--- /dev/null
+++ b/resources/js/components/labels/edit-label-dialog.tsx
@@ -0,0 +1,134 @@
+import { update } from '@/actions/App/Http/Controllers/Settings/LabelController';
+import { Badge } from '@/components/ui/badge';
+import { Button } from '@/components/ui/button';
+import {
+    Dialog,
+    DialogContent,
+    DialogDescription,
+    DialogHeader,
+    DialogTitle,
+} from '@/components/ui/dialog';
+import { Input } from '@/components/ui/input';
+import { Label } from '@/components/ui/label';
+import {
+    Select,
+    SelectContent,
+    SelectItem,
+    SelectTrigger,
+    SelectValue,
+} from '@/components/ui/select';
+import { labelSyncService } from '@/services/label-sync';
+import {
+    getLabelColorClasses,
+    LABEL_COLORS,
+    type Label as LabelType,
+} from '@/types/label';
+import { Form } from '@inertiajs/react';
+
+interface EditLabelDialogProps {
+    label: LabelType;
+    open: boolean;
+    onOpenChange: (open: boolean) => void;
+    onSuccess?: () => void;
+}
+
+export function EditLabelDialog({
+    label,
+    open,
+    onOpenChange,
+    onSuccess,
+}: EditLabelDialogProps) {
+    return (
+        <Dialog open={open} onOpenChange={onOpenChange}>
+            <DialogContent className="sm:max-w-[425px]">
+                <DialogHeader>
+                    <DialogTitle>Edit Label</DialogTitle>
+                    <DialogDescription>
+                        Update the label information.
+                    </DialogDescription>
+                </DialogHeader>
+                <Form
+                    {...update.form.patch(label.id)}
+                    onSuccess={async () => {
+                        await labelSyncService.sync();
+                        onOpenChange(false);
+                        onSuccess?.();
+                    }}
+                    className="space-y-4"
+                >
+                    {({ errors, processing }) => (
+                        <>
+                            <div className="space-y-2">
+                                <Label htmlFor="name">Name</Label>
+                                <Input
+                                    id="name"
+                                    name="name"
+                                    defaultValue={label.name}
+                                    placeholder="Label name"
+                                    required
+                                />
+                                {errors.name && (
+                                    <p className="text-sm text-red-500">
+                                        {errors.name}
+                                    </p>
+                                )}
+                            </div>
+
+                            <div className="space-y-2">
+                                <Label htmlFor="color">Color</Label>
+                                <Select
+                                    name="color"
+                                    defaultValue={label.color}
+                                    required
+                                >
+                                    <SelectTrigger>
+                                        <SelectValue placeholder="Select a color" />
+                                    </SelectTrigger>
+                                    <SelectContent>
+                                        {LABEL_COLORS.map((color) => {
+                                            const colorClasses =
+                                                getLabelColorClasses(color);
+                                            return (
+                                                <SelectItem
+                                                    key={color}
+                                                    value={color}
+                                                >
+                                                    <div className="flex items-center gap-2">
+                                                        <Badge
+                                                            className={`${colorClasses.bg} ${colorClasses.text}`}
+                                                        >
+                                                            {color}
+                                                        </Badge>
+                                                    </div>
+                                                </SelectItem>
+                                            );
+                                        })}
+                                    </SelectContent>
+                                </Select>
+                                {errors.color && (
+                                    <p className="text-sm text-red-500">
+                                        {errors.color}
+                                    </p>
+                                )}
+                            </div>
+
+                            <div className="flex justify-end gap-2">
+                                <Button
+                                    type="button"
+                                    variant="outline"
+                                    onClick={() => onOpenChange(false)}
+                                    disabled={processing}
+                                >
+                                    Cancel
+                                </Button>
+                                <Button type="submit" disabled={processing}>
+                                    {processing ? 'Updating...' : 'Update'}
+                                </Button>
+                            </div>
+                        </>
+                    )}
+                </Form>
+            </DialogContent>
+        </Dialog>
+    );
+}
diff --git a/resources/js/components/onboarding/step-create-account.tsx b/resources/js/components/onboarding/step-create-account.tsx
index eebf77de..9571c5c6 100644
--- a/resources/js/components/onboarding/step-create-account.tsx
+++ b/resources/js/components/onboarding/step-create-account.tsx
@@ -300,6 +300,7 @@ export function StepCreateAccount({
 
                     <StepButton
                         type="submit"
+                        className="w-full sm:w-full"
                         disabled={isSubmitting}
                         loading={isSubmitting}
                         loadingText="Creating..."
diff --git a/resources/js/components/shared/label-combobox.tsx b/resources/js/components/shared/label-combobox.tsx
new file mode 100644
index 00000000..e6858cd6
--- /dev/null
+++ b/resources/js/components/shared/label-combobox.tsx
@@ -0,0 +1,282 @@
+import { Badge } from '@/components/ui/badge';
+import { Button } from '@/components/ui/button';
+import {
+    Command,
+    CommandEmpty,
+    CommandInput,
+    CommandItem,
+    CommandList,
+} from '@/components/ui/command';
+import {
+    Popover,
+    PopoverContent,
+    PopoverTrigger,
+} from '@/components/ui/popover';
+import { cn } from '@/lib/utils';
+import { labelSyncService } from '@/services/label-sync';
+import { getLabelColorClasses, LABEL_COLORS, type Label } from '@/types/label';
+import { Check, ChevronsUpDown, Plus, Tag, X } from 'lucide-react';
+import { useState } from 'react';
+
+interface LabelComboboxProps {
+    value: string[];
+    onValueChange: (value: string[]) => void;
+    labels: Label[];
+    disabled?: boolean;
+    placeholder?: string;
+    triggerClassName?: string;
+    allowCreate?: boolean;
+}
+
+export function LabelCombobox({
+    value,
+    onValueChange,
+    labels,
+    disabled = false,
+    placeholder = 'Add labels...',
+    triggerClassName,
+    allowCreate = true,
+}: LabelComboboxProps) {
+    const [open, setOpen] = useState(false);
+    const [inputValue, setInputValue] = useState('');
+    const [isCreating, setIsCreating] = useState(false);
+
+    const selectedLabels = labels.filter((l) => value.includes(l.id));
+
+    const sortedLabels = [...labels].sort((a, b) =>
+        a.name.localeCompare(b.name),
+    );
+
+    const handleSelect = (labelId: string) => {
+        if (value.includes(labelId)) {
+            onValueChange(value.filter((id) => id !== labelId));
+        } else {
+            onValueChange([...value, labelId]);
+        }
+    };
+
+    const handleRemove = (labelId: string, e: React.MouseEvent) => {
+        e.stopPropagation();
+        onValueChange(value.filter((id) => id !== labelId));
+    };
+
+    const handleCreate = async () => {
+        if (!inputValue.trim() || isCreating) return;
+
+        const existingLabel = labels.find(
+            (l) => l.name.toLowerCase() === inputValue.toLowerCase(),
+        );
+        if (existingLabel) {
+            handleSelect(existingLabel.id);
+            setInputValue('');
+            return;
+        }
+
+        setIsCreating(true);
+        try {
+            const randomColor =
+                LABEL_COLORS[Math.floor(Math.random() * LABEL_COLORS.length)];
+            const newLabel = await labelSyncService.findOrCreate(
+                inputValue.trim(),
+                randomColor,
+            );
+
+            if (newLabel) {
+                onValueChange([...value, newLabel.id]);
+                setInputValue('');
+            }
+        } catch (error) {
+            console.error('Failed to create label:', error);
+        } finally {
+            setIsCreating(false);
+        }
+    };
+
+    const showCreateOption =
+        allowCreate &&
+        inputValue.trim() &&
+        !labels.some((l) => l.name.toLowerCase() === inputValue.toLowerCase());
+
+    return (
+        <Popover modal open={open} onOpenChange={setOpen}>
+            <PopoverTrigger asChild>
+                <Button
+                    variant="outline"
+                    role="combobox"
+                    aria-expanded={open}
+                    className={cn(
+                        'min-h-10 w-full justify-between',
+                        triggerClassName,
+                    )}
+                    disabled={disabled}
+                    onClick={(e) => e.stopPropagation()}
+                >
+                    {selectedLabels.length > 0 ? (
+                        <div className="flex flex-wrap gap-1">
+                            {selectedLabels.map((label) => {
+                                const colorClasses = getLabelColorClasses(
+                                    label.color,
+                                );
+                                return (
+                                    <Badge
+                                        key={label.id}
+                                        className={cn(
+                                            'gap-1 px-2 py-0.5',
+                                            colorClasses.bg,
+                                            colorClasses.text,
+                                        )}
+                                    >
+                                        <Tag className="h-3 w-3" />
+                                        {label.name}
+                                        <span
+                                            role="button"
+                                            tabIndex={0}
+                                            onClick={(e) =>
+                                                handleRemove(label.id, e)
+                                            }
+                                            onKeyDown={(e) => {
+                                                if (
+                                                    e.key === 'Enter' ||
+                                                    e.key === ' '
+                                                ) {
+                                                    handleRemove(
+                                                        label.id,
+                                                        e as unknown as React.MouseEvent,
+                                                    );
+                                                }
+                                            }}
+                                            className="ml-0.5 cursor-pointer rounded-full hover:bg-black/10"
+                                        >
+                                            <X className="h-3 w-3" />
+                                        </span>
+                                    </Badge>
+                                );
+                            })}
+                        </div>
+                    ) : (
+                        <span className="text-muted-foreground">
+                            {placeholder}
+                        </span>
+                    )}
+                    <ChevronsUpDown className="ml-2 h-4 w-4 shrink-0 opacity-50" />
+                </Button>
+            </PopoverTrigger>
+            <PopoverContent className="w-[300px] p-0" align="start">
+                <Command shouldFilter={false}>
+                    <CommandInput
+                        placeholder="Search or create labels..."
+                        value={inputValue}
+                        onValueChange={setInputValue}
+                    />
+                    <CommandList>
+                        {sortedLabels.length === 0 && !showCreateOption && (
+                            <CommandEmpty>No labels found.</CommandEmpty>
+                        )}
+                        {showCreateOption && (
+                            <CommandItem
+                                onSelect={handleCreate}
+                                disabled={isCreating}
+                                className="gap-2"
+                            >
+                                <Plus className="h-4 w-4" />
+                                {isCreating
+                                    ? 'Creating...'
+                                    : `Create "${inputValue.trim()}"`}
+                            </CommandItem>
+                        )}
+                        {sortedLabels
+                            .filter(
+                                (label) =>
+                                    !inputValue ||
+                                    label.name
+                                        .toLowerCase()
+                                        .includes(inputValue.toLowerCase()),
+                            )
+                            .map((label) => {
+                                const colorClasses = getLabelColorClasses(
+                                    label.color,
+                                );
+                                const isSelected = value.includes(label.id);
+                                return (
+                                    <CommandItem
+                                        key={label.id}
+                                        value={label.name}
+                                        onSelect={() => handleSelect(label.id)}
+                                    >
+                                        <div className="flex items-center gap-2">
+                                            <div
+                                                className={cn(
+                                                    'flex h-5 w-5 items-center justify-center rounded-full',
+                                                    colorClasses.bg,
+                                                )}
+                                            >
+                                                <Tag
+                                                    className={cn(
+                                                        'h-3 w-3',
+                                                        colorClasses.text,
+                                                    )}
+                                                />
+                                            </div>
+                                            <span className="truncate">
+                                                {label.name}
+                                            </span>
+                                        </div>
+                                        <Check
+                                            className={cn(
+                                                'ml-auto h-4 w-4',
+                                                isSelected
+                                                    ? 'opacity-100'
+                                                    : 'opacity-0',
+                                            )}
+                                        />
+                                    </CommandItem>
+                                );
+                            })}
+                    </CommandList>
+                </Command>
+            </PopoverContent>
+        </Popover>
+    );
+}
+
+export function LabelBadge({ label }: { label: Label }) {
+    const colorClasses = getLabelColorClasses(label.color);
+    return (
+        <Badge
+            className={cn(
+                'gap-1 px-2 py-0.5',
+                colorClasses.bg,
+                colorClasses.text,
+            )}
+        >
+            <Tag className="h-3 w-3" />
+            {label.name}
+        </Badge>
+    );
+}
+
+export function LabelBadges({
+    labels,
+    max = 3,
+}: {
+    labels: Label[];
+    max?: number;
+}) {
+    if (!labels || labels.length === 0) return null;
+
+    const displayLabels = labels.slice(0, max);
+    const remainingCount = labels.length - max;
+
+    return (
+        <div className="flex flex-wrap gap-1">
+            {displayLabels.map((label) => (
+                <LabelBadge key={label.id} label={label} />
+            ))}
+            {remainingCount > 0 && (
+                <Badge variant="outline" className="px-2 py-0.5">
+                    +{remainingCount}
+                </Badge>
+            )}
+        </div>
+    );
+}
diff --git a/resources/js/components/transactions/bulk-actions-bar.tsx b/resources/js/components/transactions/bulk-actions-bar.tsx
index 877ea044..91a12fad 100644
--- a/resources/js/components/transactions/bulk-actions-bar.tsx
+++ b/resources/js/components/transactions/bulk-actions-bar.tsx
@@ -1,4 +1,5 @@
 import { BulkCategorySelect } from '@/components/transactions/bulk-category-select';
+import { BulkLabelSelect } from '@/components/transactions/bulk-label-select';
 import { Button } from '@/components/ui/button';
 import { ButtonGroup } from '@/components/ui/button-group';
 import {
@@ -9,12 +10,15 @@ import {
     DropdownMenuTrigger,
 } from '@/components/ui/dropdown-menu';
 import { type Category } from '@/types/category';
+import { type Label } from '@/types/label';
 import { MoreHorizontal, Trash2, WandSparkles, X } from 'lucide-react';
 
 interface BulkActionsBarProps {
     selectedCount: number;
     categories: Category[];
+    labels: Label[];
     onCategoryChange: (categoryId: number | null) => void;
+    onLabelsChange: (labelIds: string[]) => void;
     onDelete: () => void;
     onReEvaluateRules: () => void;
     onClear: () => void;
@@ -24,7 +28,9 @@ interface BulkActionsBarProps {
 export function BulkActionsBar({
     selectedCount,
     categories,
+    labels,
     onCategoryChange,
+    onLabelsChange,
     onDelete,
     onReEvaluateRules,
     onClear,
@@ -50,6 +56,12 @@ export function BulkActionsBar({
                             disabled={isUpdating}
                         />
 
+                        <BulkLabelSelect
+                            labels={labels}
+                            onLabelsChange={onLabelsChange}
+                            disabled={isUpdating}
+                        />
+
                         <DropdownMenu>
                             <DropdownMenuTrigger asChild>
                                 <Button
diff --git a/resources/js/components/transactions/bulk-label-select.tsx b/resources/js/components/transactions/bulk-label-select.tsx
new file mode 100644
index 00000000..6ed5ae69
--- /dev/null
+++ b/resources/js/components/transactions/bulk-label-select.tsx
@@ -0,0 +1,34 @@
+import { LabelCombobox } from '@/components/shared/label-combobox';
+import { type Label } from '@/types/label';
+import { useState } from 'react';
+
+interface BulkLabelSelectProps {
+    labels: Label[];
+    onLabelsChange: (labelIds: string[]) => void;
+    disabled?: boolean;
+}
+
+export function BulkLabelSelect({
+    labels,
+    onLabelsChange,
+    disabled = false,
+}: BulkLabelSelectProps) {
+    const [value, setValue] = useState<string[]>([]);
+
+    function handleChange(newValue: string[]) {
+        setValue(newValue);
+        onLabelsChange(newValue);
+    }
+
+    return (
+        <LabelCombobox
+            value={value}
+            onValueChange={handleChange}
+            labels={labels}
+            disabled={disabled}
+            placeholder="Add labels"
+            triggerClassName="h-9 w-[180px] min-h-9"
+            allowCreate={true}
+        />
+    );
+}
diff --git a/resources/js/components/transactions/edit-transaction-dialog.tsx b/resources/js/components/transactions/edit-transaction-dialog.tsx
index ce84c833..02e69486 100644
--- a/resources/js/components/transactions/edit-transaction-dialog.tsx
+++ b/resources/js/components/transactions/edit-transaction-dialog.tsx
@@ -1,3 +1,4 @@
+import { LabelCombobox } from '@/components/shared/label-combobox';
 import { CategorySelect } from '@/components/transactions/category-select';
 import { AmountInput } from '@/components/ui/amount-input';
 import { Button } from '@/components/ui/button';
@@ -10,7 +11,7 @@ import {
     DialogTitle,
 } from '@/components/ui/dialog';
 import { Input } from '@/components/ui/input';
-import { Label } from '@/components/ui/label';
+import { Label as FormLabel } from '@/components/ui/label';
 import {
     Select,
     SelectContent,
@@ -33,6 +34,7 @@ import {
 } from '@/types/account';
 import { type AutomationRule } from '@/types/automation-rule';
 import { type Category } from '@/types/category';
+import { type Label } from '@/types/label';
 import { type DecryptedTransaction } from '@/types/transaction';
 import { format, getYear, parseISO } from 'date-fns';
 import { useEffect, useState } from 'react';
@@ -43,6 +45,7 @@ interface EditTransactionDialogProps {
     categories: Category[];
     accounts: Account[];
     banks: Bank[];
+    labels: Label[];
     open: boolean;
     onOpenChange: (open: boolean) => void;
     onSuccess: (transaction: DecryptedTransaction) => void;
@@ -54,6 +57,7 @@ export function EditTransactionDialog({
     categories,
     accounts,
     banks,
+    labels,
     open,
     onOpenChange,
     onSuccess,
@@ -65,6 +69,7 @@ export function EditTransactionDialog({
     const [amount, setAmount] = useState<number>(0);
     const [accountId, setAccountId] = useState<string>('');
     const [categoryId, setCategoryId] = useState<string>('null');
+    const [selectedLabelIds, setSelectedLabelIds] = useState<string[]>([]);
     const [notes, setNotes] = useState('');
     const [isSubmitting, setIsSubmitting] = useState(false);
     const [decryptedAccountNames, setDecryptedAccountNames] = useState<
@@ -81,6 +86,11 @@ export function EditTransactionDialog({
             setAmount(transaction.amount);
             setAccountId(transaction.account_id);
             setCategoryId(transaction.category_id || 'null');
+            setSelectedLabelIds(
+                transaction.label_ids ||
+                    transaction.labels?.map((l) => l.id) ||
+                    [],
+            );
             setNotes(transaction.decryptedNotes || '');
         } else if (mode === 'create' && open) {
             const today = new Date().toISOString().split('T')[0];
@@ -92,6 +102,7 @@ export function EditTransactionDialog({
                 availableAccounts.length > 0 ? availableAccounts[0].id : '',
             );
             setCategoryId('null');
+            setSelectedLabelIds([]);
             setNotes('');
         }
     }, [mode, transaction, open, accounts]);
@@ -366,10 +377,12 @@ export function EditTransactionDialog({
                     notes_iv: string | null;
                     description?: string;
                     description_iv?: string;
+                    label_ids?: string[];
                 } = {
                     category_id: selectedCategoryId,
                     notes: encryptedNotes,
                     notes_iv: notesIv,
+                    label_ids: selectedLabelIds,
                 };
 
                 let finalDecryptedDescription =
@@ -399,6 +412,10 @@ export function EditTransactionDialog({
                       ) || null
                     : null;
 
+                const selectedLabels = labels.filter((label) =>
+                    selectedLabelIds.includes(label.id),
+                );
+
                 const updatedTransaction: DecryptedTransaction = {
                     ...transaction,
                     category_id: selectedCategoryId,
@@ -411,6 +428,8 @@ export function EditTransactionDialog({
                     decryptedNotes: trimmedNotes || null,
                     notes: encryptedNotes,
                     notes_iv: notesIv,
+                    label_ids: selectedLabelIds,
+                    labels: selectedLabels,
                     updated_at:
                         updatedRecord?.updated_at ?? transaction.updated_at,
                 };
@@ -451,7 +470,7 @@ export function EditTransactionDialog({
                 <form onSubmit={handleSubmit}>
                     <div className="space-y-4 py-4">
                         <div className="space-y-2">
-                            <Label
+                            <FormLabel
                                 htmlFor="date"
                                 className={
                                     mode === 'edit'
@@ -460,7 +479,7 @@ export function EditTransactionDialog({
                                 }
                             >
                                 Date
-                            </Label>
+                            </FormLabel>
                             {mode === 'create' ? (
                                 <Input
                                     id="date"
@@ -495,7 +514,7 @@ export function EditTransactionDialog({
                         </div>
 
                         <div className="space-y-2">
-                            <Label
+                            <FormLabel
                                 htmlFor="description"
                                 className={
                                     mode === 'edit' &&
@@ -505,7 +524,7 @@ export function EditTransactionDialog({
                                 }
                             >
                                 Description
-                            </Label>
+                            </FormLabel>
                             {mode === 'create' ||
                             (mode === 'edit' &&
                                 transaction?.source === 'manually_created') ? (
@@ -542,7 +561,7 @@ export function EditTransactionDialog({
                         </div>
 
                         <div className="space-y-2">
-                            <Label
+                            <FormLabel
                                 htmlFor="amount"
                                 className={
                                     mode === 'edit'
@@ -551,7 +570,7 @@ export function EditTransactionDialog({
                                 }
                             >
                                 Amount
-                            </Label>
+                            </FormLabel>
                             {mode === 'create' ? (
                                 <AmountInput
                                     id="amount"
@@ -576,7 +595,7 @@ export function EditTransactionDialog({
 
                         {mode === 'create' && (
                             <div className="space-y-2">
-                                <Label htmlFor="account">Account</Label>
+                                <FormLabel htmlFor="account">Account</FormLabel>
                                 <Select
                                     value={accountId}
                                     onValueChange={setAccountId}
@@ -604,7 +623,7 @@ export function EditTransactionDialog({
                         )}
 
                         <div className="space-y-2">
-                            <Label htmlFor="category">Category</Label>
+                            <FormLabel htmlFor="category">Category</FormLabel>
                             <CategorySelect
                                 value={categoryId}
                                 onValueChange={setCategoryId}
@@ -617,7 +636,19 @@ export function EditTransactionDialog({
                         </div>
 
                         <div className="space-y-2">
-                            <Label htmlFor="notes">Notes</Label>
+                            <FormLabel>Labels</FormLabel>
+                            <LabelCombobox
+                                value={selectedLabelIds}
+                                onValueChange={setSelectedLabelIds}
+                                labels={labels}
+                                disabled={isSubmitting}
+                                placeholder="Add labels..."
+                                allowCreate={true}
+                            />
+                        </div>
+
+                        <div className="space-y-2">
+                            <FormLabel htmlFor="notes">Notes</FormLabel>
                             <Textarea
                                 id="notes"
                                 placeholder="Add notes..."
diff --git a/resources/js/components/transactions/transaction-columns.tsx b/resources/js/components/transactions/transaction-columns.tsx
index e8261874..e2a3fa6a 100644
--- a/resources/js/components/transactions/transaction-columns.tsx
+++ b/resources/js/components/transactions/transaction-columns.tsx
@@ -3,6 +3,7 @@ import { format, getYear, parseISO } from 'date-fns';
 import { ArrowDown, MoreHorizontal } from 'lucide-react';
 
 import { EncryptedText } from '@/components/encrypted-text';
+import { LabelBadges } from '@/components/shared/label-combobox';
 import { CategoryCell } from '@/components/transactions/category-cell';
 import { Button } from '@/components/ui/button';
 import { Checkbox } from '@/components/ui/checkbox';
@@ -15,12 +16,14 @@ import {
 } from '@/components/ui/dropdown-menu';
 import { type Account, type Bank } from '@/types/account';
 import { type Category } from '@/types/category';
+import { type Label } from '@/types/label';
 import { type DecryptedTransaction } from '@/types/transaction';
 
 interface CreateColumnsOptions {
     categories: Category[];
     accounts: Account[];
     banks: Bank[];
+    labels: Label[];
     onEdit: (transaction: DecryptedTransaction) => void;
     onDelete: (transaction: DecryptedTransaction) => void;
     onUpdate: (transaction: DecryptedTransaction) => void;
@@ -31,6 +34,7 @@ export function createTransactionColumns({
     categories,
     accounts,
     banks,
+    labels,
     onEdit,
     onDelete,
     onUpdate,
@@ -128,6 +132,24 @@ export function createTransactionColumns({
                 );
             },
         },
+        {
+            id: 'labels',
+            accessorKey: 'label_ids',
+            meta: { label: 'Labels' },
+            header: 'Labels',
+            cell: ({ row }) => {
+                const transaction = row.original;
+                // Resolve labels from label_ids using the labels map
+                const transactionLabels = (transaction.label_ids || [])
+                    .map((id) => labels.find((l) => l.id === id))
+                    .filter(Boolean) as Label[];
+                if (transactionLabels.length === 0) {
+                    return null;
+                }
+                return <LabelBadges labels={transactionLabels} max={2} />;
+            },
+            enableHiding: true,
+        },
         {
             accessorKey: 'bank',
             meta: { label: 'Bank' },
diff --git a/resources/js/components/transactions/transaction-filters.tsx b/resources/js/components/transactions/transaction-filters.tsx
index 44ea42c0..a529bdce 100644
--- a/resources/js/components/transactions/transaction-filters.tsx
+++ b/resources/js/components/transactions/transaction-filters.tsx
@@ -1,6 +1,6 @@
 import { format } from 'date-fns';
 import * as Icons from 'lucide-react';
-import { Check, ChevronsUpDown, X } from 'lucide-react';
+import { Check, ChevronsUpDown, Tag, X } from 'lucide-react';
 import { type ReactNode, useState } from 'react';
 
 import { EncryptedText } from '@/components/encrypted-text';
@@ -14,7 +14,7 @@ import {
     CommandList,
 } from '@/components/ui/command';
 import { Input } from '@/components/ui/input';
-import { Label } from '@/components/ui/label';
+import { Label as FormLabel } from '@/components/ui/label';
 import {
     Popover,
     PopoverContent,
@@ -23,6 +23,7 @@ import {
 import { cn } from '@/lib/utils';
 import { type Account } from '@/types/account';
 import { type Category, getCategoryColorClasses } from '@/types/category';
+import { getLabelColorClasses, type Label } from '@/types/label';
 import { type TransactionFilters as FiltersType } from '@/types/transaction';
 import { CategoryIcon } from '../shared/category-combobox';
 
@@ -30,6 +31,7 @@ interface TransactionFiltersProps {
     filters: FiltersType;
     onFiltersChange: (filters: FiltersType) => void;
     categories: Category[];
+    labels: Label[];
     accounts: Account[];
     isKeySet: boolean;
     actions?: ReactNode;
@@ -40,6 +42,7 @@ export function TransactionFilters({
     filters,
     onFiltersChange,
     categories,
+    labels,
     accounts,
     isKeySet,
     actions,
@@ -47,6 +50,7 @@ export function TransactionFilters({
 }: TransactionFiltersProps) {
     const [isOpen, setIsOpen] = useState(false);
     const [categoryDropdownOpen, setCategoryDropdownOpen] = useState(false);
+    const [labelDropdownOpen, setLabelDropdownOpen] = useState(false);
     const isUncategorizedSelected = filters.categoryIds.includes(
         UNCATEGORIZED_CATEGORY_ID,
     );
@@ -67,6 +71,14 @@ export function TransactionFilters({
         onFiltersChange({ ...filters, accountIds: newAccountIds });
     }
 
+    function handleLabelToggle(labelId: string) {
+        const newLabelIds = filters.labelIds.includes(labelId)
+            ? filters.labelIds.filter((id) => id !== labelId)
+            : [...filters.labelIds, labelId];
+
+        onFiltersChange({ ...filters, labelIds: newLabelIds });
+    }
+
     function clearFilters() {
         onFiltersChange({
             dateFrom: null,
@@ -75,6 +87,7 @@ export function TransactionFilters({
             amountMax: null,
             categoryIds: [],
             accountIds: [],
+            labelIds: [],
             searchText: '',
         });
     }
@@ -85,6 +98,7 @@ export function TransactionFilters({
         (filters.amountMin !== null ? 1 : 0) +
         (filters.amountMax !== null ? 1 : 0) +
         filters.categoryIds.length +
+        filters.labelIds.length +
         (hideAccountFilter ? 0 : filters.accountIds.length);
 
     return (
@@ -132,7 +146,7 @@ export function TransactionFilters({
                                 </div>
 
                                 <div className="space-y-2">
-                                    <Label>Date</Label>
+                                    <FormLabel>Date</FormLabel>
                                     <div className="grid grid-cols-2 gap-2 pt-2">
                                         <Input
                                             type="date"
@@ -182,7 +196,7 @@ export function TransactionFilters({
                                 </div>
 
                                 <div className="space-y-2">
-                                    <Label>Amount</Label>
+                                    <FormLabel>Amount</FormLabel>
                                     <div className="grid grid-cols-2 gap-2 pt-2">
                                         <Input
                                             type="number"
@@ -220,7 +234,7 @@ export function TransactionFilters({
                                 </div>
 
                                 <div className="space-y-2">
-                                    <Label>Categories</Label>
+                                    <FormLabel>Categories</FormLabel>
                                     <div className="pt-2">
                                         <Popover
                                             open={categoryDropdownOpen}
@@ -350,9 +364,109 @@ export function TransactionFilters({
                                     </div>
                                 </div>
 
+                                <div className="space-y-2">
+                                    <FormLabel>Labels</FormLabel>
+                                    <div className="pt-2">
+                                        <Popover
+                                            open={labelDropdownOpen}
+                                            onOpenChange={setLabelDropdownOpen}
+                                        >
+                                            <PopoverTrigger asChild>
+                                                <Button
+                                                    variant="outline"
+                                                    role="combobox"
+                                                    className="w-full justify-between"
+                                                >
+                                                    {filters.labelIds.length >
+                                                    0 ? (
+                                                        <span className="truncate">
+                                                            {
+                                                                filters.labelIds
+                                                                    .length
+                                                            }{' '}
+                                                            selected
+                                                        </span>
+                                                    ) : (
+                                                        <span className="text-muted-foreground">
+                                                            Select labels...
+                                                        </span>
+                                                    )}
+                                                    <ChevronsUpDown className="ml-2 h-4 w-4 shrink-0 opacity-50" />
+                                                </Button>
+                                            </PopoverTrigger>
+                                            <PopoverContent
+                                                className="w-full p-0"
+                                                align="start"
+                                            >
+                                                <Command>
+                                                    <CommandInput placeholder="Search labels..." />
+                                                    <CommandList>
+                                                        <CommandEmpty>
+                                                            No labels found.
+                                                        </CommandEmpty>
+                                                        {labels.map((label) => {
+                                                            const isSelected =
+                                                                filters.labelIds.includes(
+                                                                    label.id,
+                                                                );
+                                                            const colorClasses =
+                                                                getLabelColorClasses(
+                                                                    label.color,
+                                                                );
+                                                            return (
+                                                                <CommandItem
+                                                                    key={
+                                                                        label.id
+                                                                    }
+                                                                    onSelect={() =>
+                                                                        handleLabelToggle(
+                                                                            label.id,
+                                                                        )
+                                                                    }
+                                                                >
+                                                                    <div
+                                                                        className={cn(
+                                                                            'mr-1 flex size-4 items-center justify-center rounded-sm border border-primary p-1',
+                                                                            isSelected
+                                                                                ? 'bg-primary/10 text-primary-foreground'
+                                                                                : 'opacity-50 [&_svg]:invisible',
+                                                                        )}
+                                                                    >
+                                                                        <Check className="size-3" />
+                                                                    </div>
+                                                                    <div className="flex items-center gap-2">
+                                                                        <div
+                                                                            className={cn(
+                                                                                'flex h-5 w-5 items-center justify-center rounded-full',
+                                                                                colorClasses.bg,
+                                                                            )}
+                                                                        >
+                                                                            <Tag
+                                                                                className={cn(
+                                                                                    'h-3 w-3',
+                                                                                    colorClasses.text,
+                                                                                )}
+                                                                            />
+                                                                        </div>
+                                                                        <span>
+                                                                            {
+                                                                                label.name
+                                                                            }
+                                                                        </span>
+                                                                    </div>
+                                                                </CommandItem>
+                                                            );
+                                                        })}
+                                                    </CommandList>
+                                                </Command>
+                                            </PopoverContent>
+                                        </Popover>
+                                    </div>
+                                </div>
+
                                 {!hideAccountFilter && (
                                     <div className="space-y-2">
-                                        <Label>Accounts</Label>
+                                        <FormLabel>Accounts</FormLabel>
                                         <div className="flex flex-wrap gap-2 pt-2">
                                             {accounts.map((account) => {
                                                 const isSelected =
diff --git a/resources/js/contexts/sync-context.tsx b/resources/js/contexts/sync-context.tsx
index 98242fda..6dd6a224 100644
--- a/resources/js/contexts/sync-context.tsx
+++ b/resources/js/contexts/sync-context.tsx
@@ -7,6 +7,7 @@ import { accountSyncService } from '@/services/account-sync';
 import { automationRuleSyncService } from '@/services/automation-rule-sync';
 import { bankSyncService } from '@/services/bank-sync';
 import { categorySyncService } from '@/services/category-sync';
+import { labelSyncService } from '@/services/label-sync';
 import { transactionSyncService } from '@/services/transaction-sync';
 import type { User } from '@/types/index.d';
 import type { Page } from '@inertiajs/core';
@@ -149,6 +150,7 @@ export function SyncProvider({
                 accountBalancesResult,
                 banksResult,
                 automationRulesResult,
+                labelsResult,
                 transactionsResult,
             ] = await Promise.all([
                 categorySyncService.sync(),
@@ -156,6 +158,7 @@ export function SyncProvider({
                 accountBalanceSyncService.sync(),
                 bankSyncService.sync(),
                 automationRuleSyncService.sync(),
+                labelSyncService.sync(),
                 transactionSyncService.sync(),
             ]);
 
@@ -165,6 +168,7 @@ export function SyncProvider({
                 ...accountBalancesResult.errors,
                 ...banksResult.errors,
                 ...automationRulesResult.errors,
+                ...labelsResult.errors,
                 ...transactionsResult.errors,
             ];
 
diff --git a/resources/js/layouts/settings/layout.tsx b/resources/js/layouts/settings/layout.tsx
index d35b3985..266c349e 100644
--- a/resources/js/layouts/settings/layout.tsx
+++ b/resources/js/layouts/settings/layout.tsx
@@ -1,6 +1,7 @@
 import { index as accountsIndex } from '@/actions/App/Http/Controllers/Settings/AccountController';
 import { index as automationRulesIndex } from '@/actions/App/Http/Controllers/Settings/AutomationRuleController';
 import { index as categoriesIndex } from '@/actions/App/Http/Controllers/Settings/CategoryController';
+import { index as labelsIndex } from '@/actions/App/Http/Controllers/Settings/LabelController';
 import Heading from '@/components/heading';
 import { Button } from '@/components/ui/button';
 import { Separator } from '@/components/ui/separator';
@@ -39,6 +40,12 @@ const getNavItems = (
         href: categoriesIndex(),
         icon: null,
     },
+    {
+        type: 'nav-item',
+        title: 'Labels',
+        href: labelsIndex(),
+        icon: null,
+    },
     { type: 'divider' },
     {
         type: 'section-header',
diff --git a/resources/js/lib/dexie-db.ts b/resources/js/lib/dexie-db.ts
index ab349aec..e17e68a6 100644
--- a/resources/js/lib/dexie-db.ts
+++ b/resources/js/lib/dexie-db.ts
@@ -2,6 +2,7 @@ import type { Transaction } from '@/services/transaction-sync';
 import type { Account, AccountBalance, Bank } from '@/types/account';
 import type { AutomationRule } from '@/types/automation-rule';
 import type { Category } from '@/types/category';
+import type { Label } from '@/types/label';
 import Dexie, { type EntityTable } from 'dexie';
 
 export interface SyncMetadata {
@@ -21,6 +22,7 @@ const db = new Dexie('whisper_money') as Dexie & {
     transactions: EntityTable<Transaction, 'id'>;
     accounts: EntityTable<Account, 'id'>;
     categories: EntityTable<Category, 'id'>;
+    labels: EntityTable<Label, 'id'>;
     banks: EntityTable<Bank, 'id'>;
     automation_rules: EntityTable<AutomationRule, 'id'>;
     account_balances: EntityTable<AccountBalance, 'id'>;
@@ -39,4 +41,16 @@ db.version(5).stores({
     pending_changes: '++id, store, timestamp',
 });
 
+db.version(6).stores({
+    transactions: 'id, user_id, account_id, updated_at',
+    accounts: 'id, user_id, bank_id, updated_at',
+    categories: 'id, user_id, updated_at',
+    labels: 'id, user_id, updated_at',
+    banks: 'id, user_id, updated_at',
+    automation_rules: 'id, user_id, priority, updated_at',
+    account_balances: 'id, account_id, balance_date, updated_at',
+    sync_metadata: 'key',
+    pending_changes: '++id, store, timestamp',
+});
+
 export { db };
diff --git a/resources/js/lib/rule-engine.ts b/resources/js/lib/rule-engine.ts
index dc77c0c6..178d4af3 100644
--- a/resources/js/lib/rule-engine.ts
+++ b/resources/js/lib/rule-engine.ts
@@ -3,6 +3,7 @@ import { consoleDebug } from '@/lib/debug';
 import type { Account, Bank } from '@/types/account';
 import type { AutomationRule } from '@/types/automation-rule';
 import type { Category } from '@/types/category';
+import type { Label } from '@/types/label';
 import type { DecryptedTransaction } from '@/types/transaction';
 import type { UUID } from '@/types/uuid';
 import jsonLogic from 'json-logic-js';
@@ -10,6 +11,8 @@ import jsonLogic from 'json-logic-js';
 export interface RuleEvaluationResult {
     rule: AutomationRule;
     categoryId: UUID | null;
+    labelIds: UUID[];
+    labels: Label[];
     note: string | null;
     noteIv: string | null;
 }
@@ -157,6 +160,8 @@ export async function evaluateRules(
                 return {
                     rule,
                     categoryId: rule.action_category_id,
+                    labelIds: rule.labels?.map((l) => l.id) || [],
+                    labels: rule.labels || [],
                     note: rule.action_note,
                     noteIv: rule.action_note_iv,
                 };
@@ -288,6 +293,8 @@ export async function evaluateRulesForNewTransaction(
                 return {
                     rule,
                     categoryId: rule.action_category_id,
+                    labelIds: rule.labels?.map((l) => l.id) || [],
+                    labels: rule.labels || [],
                     note: rule.action_note,
                     noteIv: rule.action_note_iv,
                 };
diff --git a/resources/js/pages/settings/labels.tsx b/resources/js/pages/settings/labels.tsx
new file mode 100644
index 00000000..c9d1e9a3
--- /dev/null
+++ b/resources/js/pages/settings/labels.tsx
@@ -0,0 +1,335 @@
+import { Head } from '@inertiajs/react';
+import {
+    Cell,
+    ColumnDef,
+    ColumnFiltersState,
+    flexRender,
+    getCoreRowModel,
+    getFilteredRowModel,
+    getSortedRowModel,
+    Row,
+    SortingState,
+    useReactTable,
+    VisibilityState,
+} from '@tanstack/react-table';
+import { useLiveQuery } from 'dexie-react-hooks';
+import { ArrowUpDown, MoreHorizontal, Tag } from 'lucide-react';
+import { useState } from 'react';
+
+import { index as labelsIndex } from '@/actions/App/Http/Controllers/Settings/LabelController';
+import HeadingSmall from '@/components/heading-small';
+import { CreateLabelDialog } from '@/components/labels/create-label-dialog';
+import { DeleteLabelDialog } from '@/components/labels/delete-label-dialog';
+import { EditLabelDialog } from '@/components/labels/edit-label-dialog';
+import { Badge } from '@/components/ui/badge';
+import { Button } from '@/components/ui/button';
+import {
+    ContextMenu,
+    ContextMenuContent,
+    ContextMenuItem,
+    ContextMenuLabel,
+    ContextMenuTrigger,
+} from '@/components/ui/context-menu';
+import {
+    DropdownMenu,
+    DropdownMenuContent,
+    DropdownMenuItem,
+    DropdownMenuLabel,
+    DropdownMenuTrigger,
+} from '@/components/ui/dropdown-menu';
+import { Input } from '@/components/ui/input';
+import {
+    Table,
+    TableBody,
+    TableCell,
+    TableHead,
+    TableHeader,
+    TableRow,
+} from '@/components/ui/table';
+import AppLayout from '@/layouts/app-layout';
+import SettingsLayout from '@/layouts/settings/layout';
+import { db } from '@/lib/dexie-db';
+import { type BreadcrumbItem } from '@/types';
+import { getLabelColorClasses, type Label } from '@/types/label';
+
+const breadcrumbs: BreadcrumbItem[] = [
+    {
+        title: 'Labels settings',
+        href: labelsIndex().url,
+    },
+];
+
+function LabelActions({ label }: { label: Label }) {
+    const [editOpen, setEditOpen] = useState(false);
+    const [deleteOpen, setDeleteOpen] = useState(false);
+
+    return (
+        <>
+            <DropdownMenu>
+                <DropdownMenuTrigger asChild>
+                    <Button variant="ghost" className="h-8 w-8 p-0">
+                        <span className="sr-only">Open menu</span>
+                        <MoreHorizontal className="h-4 w-4" />
+                    </Button>
+                </DropdownMenuTrigger>
+                <DropdownMenuContent align="end">
+                    <DropdownMenuLabel>Actions</DropdownMenuLabel>
+                    <DropdownMenuItem onClick={() => setEditOpen(true)}>
+                        Edit
+                    </DropdownMenuItem>
+                    <DropdownMenuItem
+                        onClick={() => setDeleteOpen(true)}
+                        variant="destructive"
+                    >
+                        Delete
+                    </DropdownMenuItem>
+                </DropdownMenuContent>
+            </DropdownMenu>
+
+            <EditLabelDialog
+                label={label}
+                open={editOpen}
+                onOpenChange={setEditOpen}
+                onSuccess={() => {}}
+            />
+            <DeleteLabelDialog
+                label={label}
+                open={deleteOpen}
+                onOpenChange={setDeleteOpen}
+                onSuccess={() => {}}
+            />
+        </>
+    );
+}
+
+function LabelRow({ row }: { row: Row<Label> }) {
+    const label = row.original;
+    const [editOpen, setEditOpen] = useState(false);
+    const [deleteOpen, setDeleteOpen] = useState(false);
+    const [contextMenuOpen, setContextMenuOpen] = useState(false);
+
+    return (
+        <>
+            <ContextMenu onOpenChange={setContextMenuOpen}>
+                <ContextMenuTrigger asChild>
+                    <TableRow
+                        data-state={
+                            (row.getIsSelected() || contextMenuOpen) &&
+                            'selected'
+                        }
+                    >
+                        {row
+                            .getVisibleCells()
+                            .map((cell: Cell<Label, unknown>) => (
+                                <TableCell key={cell.id}>
+                                    {flexRender(
+                                        cell.column.columnDef.cell,
+                                        cell.getContext(),
+                                    )}
+                                </TableCell>
+                            ))}
+                    </TableRow>
+                </ContextMenuTrigger>
+                <ContextMenuContent>
+                    <ContextMenuLabel>Actions</ContextMenuLabel>
+                    <ContextMenuItem onClick={() => setEditOpen(true)}>
+                        Edit
+                    </ContextMenuItem>
+                    <ContextMenuItem
+                        onClick={() => setDeleteOpen(true)}
+                        variant="destructive"
+                    >
+                        Delete
+                    </ContextMenuItem>
+                </ContextMenuContent>
+            </ContextMenu>
+
+            <EditLabelDialog
+                label={label}
+                open={editOpen}
+                onOpenChange={setEditOpen}
+                onSuccess={() => {}}
+            />
+            <DeleteLabelDialog
+                label={label}
+                open={deleteOpen}
+                onOpenChange={setDeleteOpen}
+                onSuccess={() => {}}
+            />
+        </>
+    );
+}
+
+export default function Labels() {
+    const labels = useLiveQuery(() => db.labels.toArray(), []) || [];
+    const [sorting, setSorting] = useState<SortingState>([
+        { id: 'name', desc: false },
+    ]);
+    const [columnFilters, setColumnFilters] = useState<ColumnFiltersState>([]);
+    const [columnVisibility, setColumnVisibility] = useState<VisibilityState>(
+        {},
+    );
+
+    const columns: ColumnDef<Label>[] = [
+        {
+            accessorKey: 'name',
+            header: ({ column }) => {
+                return (
+                    <Button
+                        variant="ghost"
+                        onClick={() =>
+                            column.toggleSorting(column.getIsSorted() === 'asc')
+                        }
+                    >
+                        Name
+                        <ArrowUpDown className="ml-2 h-4 w-4" />
+                    </Button>
+                );
+            },
+            cell: ({ row }) => {
+                return (
+                    <div className="flex items-center gap-3 pl-3">
+                        <Tag className="h-4 w-4 opacity-80" />
+                        <div className="font-medium">
+                            {row.getValue('name')}
+                        </div>
+                    </div>
+                );
+            },
+        },
+        {
+            accessorKey: 'color',
+            header: 'Color',
+            cell: ({ row }) => {
+                const color = row.getValue('color') as Label['color'];
+                if (!color) {
+                    return null;
+                }
+                const colorClasses = getLabelColorClasses(color);
+                return (
+                    <Badge
+                        className={`${colorClasses.bg} ${colorClasses.text} text-[10px] tracking-widest`}
+                    >
+                        {color.toLocaleUpperCase()}
+                    </Badge>
+                );
+            },
+        },
+        {
+            id: 'actions',
+            enableHiding: false,
+            cell: ({ row }) => <LabelActions label={row.original} />,
+        },
+    ];
+
+    const table = useReactTable({
+        data: labels,
+        columns,
+        onSortingChange: setSorting,
+        onColumnFiltersChange: setColumnFilters,
+        getCoreRowModel: getCoreRowModel(),
+        getSortedRowModel: getSortedRowModel(),
+        getFilteredRowModel: getFilteredRowModel(),
+        onColumnVisibilityChange: setColumnVisibility,
+        state: {
+            sorting,
+            columnFilters,
+            columnVisibility,
+        },
+    });
+
+    return (
+        <AppLayout breadcrumbs={breadcrumbs}>
+            <Head title="Labels settings" />
+
+            <SettingsLayout>
+                <div className="space-y-6">
+                    <HeadingSmall
+                        title="Labels settings"
+                        description="Manage your transaction labels"
+                    />
+
+                    <div className="space-y-4">
+                        <div className="flex items-center justify-between">
+                            <Input
+                                placeholder="Filter labels..."
+                                value={
+                                    (table
+                                        .getColumn('name')
+                                        ?.getFilterValue() as string) ?? ''
+                                }
+                                onChange={(event) =>
+                                    table
+                                        .getColumn('name')
+                                        ?.setFilterValue(event.target.value)
+                                }
+                                className="max-w-sm"
+                            />
+                            <CreateLabelDialog onSuccess={() => {}} />
+                        </div>
+
+                        <div className="overflow-hidden rounded-md border">
+                            <Table>
+                                <TableHeader>
+                                    {table
+                                        .getHeaderGroups()
+                                        .map((headerGroup) => (
+                                            <TableRow key={headerGroup.id}>
+                                                {headerGroup.headers.map(
+                                                    (header) => {
+                                                        return (
+                                                            <TableHead
+                                                                key={header.id}
+                                                            >
+                                                                {header.isPlaceholder
+                                                                    ? null
+                                                                    : flexRender(
+                                                                          header
+                                                                              .column
+                                                                              .columnDef
+                                                                              .header,
+                                                                          header.getContext(),
+                                                                      )}
+                                                            </TableHead>
+                                                        );
+                                                    },
+                                                )}
+                                            </TableRow>
+                                        ))}
+                                </TableHeader>
+                                <TableBody>
+                                    {table.getRowModel().rows?.length ? (
+                                        table
+                                            .getRowModel()
+                                            .rows.map((row) => (
+                                                <LabelRow
+                                                    key={row.id}
+                                                    row={row}
+                                                />
+                                            ))
+                                    ) : (
+                                        <TableRow>
+                                            <TableCell
+                                                colSpan={columns.length}
+                                                className="h-24 text-center"
+                                            >
+                                                No labels found.
+                                            </TableCell>
+                                        </TableRow>
+                                    )}
+                                </TableBody>
+                            </Table>
+                        </div>
+
+                        <div className="flex items-center justify-end">
+                            <div className="text-sm text-muted-foreground">
+                                {table.getFilteredRowModel().rows.length}{' '}
+                                label(s) total.
+                            </div>
+                        </div>
+                    </div>
+                </div>
+            </SettingsLayout>
+        </AppLayout>
+    );
+}
diff --git a/resources/js/pages/transactions/index.tsx b/resources/js/pages/transactions/index.tsx
index 1897d4dc..04688886 100644
--- a/resources/js/pages/transactions/index.tsx
+++ b/resources/js/pages/transactions/index.tsx
@@ -61,6 +61,7 @@ import { transactionSyncService } from '@/services/transaction-sync';
 import { type BreadcrumbItem } from '@/types';
 import { type Account, type Bank } from '@/types/account';
 import { type Category } from '@/types/category';
+import { type Label } from '@/types/label';
 import {
     type DecryptedTransaction,
     type TransactionFilters as Filters,
@@ -77,6 +78,7 @@ interface Props {
     categories: Category[];
     accounts: Account[];
     banks: Bank[];
+    labels: Label[];
 }
 
 const COLUMN_VISIBILITY_KEY = 'transactions-column-visibility';
@@ -157,8 +159,9 @@ function TransactionRowComponent({
 }
 
 function getInitialColumnVisibility(): VisibilityState {
+    const defaultVisibility = { bank: false };
     if (typeof window === 'undefined') {
-        return { account: false };
+        return defaultVisibility;
     }
 
     try {
@@ -172,10 +175,15 @@ function getInitialColumnVisibility(): VisibilityState {
             error,
         );
     }
-    return { account: false };
+    return defaultVisibility;
 }
 
-export default function Transactions({ categories, accounts, banks }: Props) {
+export default function Transactions({
+    categories,
+    accounts,
+    banks,
+    labels: initialLabels,
+}: Props) {
     const { isKeySet } = useEncryptionKey();
 
     const transactionIds = useLiveQuery(
@@ -209,8 +217,10 @@ export default function Transactions({ categories, accounts, banks }: Props) {
         amountMax: null,
         categoryIds: [],
         accountIds: [],
+        labelIds: [],
         searchText: '',
     });
+    const labels = useLiveQuery(() => db.labels.toArray(), [], initialLabels);
     const [editTransaction, setEditTransaction] =
         useState<DecryptedTransaction | null>(null);
     const [createDialogOpen, setCreateDialogOpen] = useState(false);
@@ -504,6 +514,17 @@ export default function Transactions({ categories, accounts, banks }: Props) {
                 return false;
             }
 
+            if (filters.labelIds.length > 0) {
+                const transactionLabelIds =
+                    transaction.labels?.map((l) => l.id) || [];
+                const hasMatchingLabel = filters.labelIds.some((labelId) =>
+                    transactionLabelIds.includes(labelId),
+                );
+                if (!hasMatchingLabel) {
+                    return false;
+                }
+            }
+
             if (filters.searchText && isKeySet) {
                 const searchLower = filters.searchText.toLowerCase();
                 const matchesDescription = transaction.decryptedDescription
@@ -607,6 +628,7 @@ export default function Transactions({ categories, accounts, banks }: Props) {
                     categories,
                     accounts,
                     banks,
+                    labels,
                     key,
                 );
 
@@ -693,7 +715,7 @@ export default function Transactions({ categories, accounts, banks }: Props) {
                 consoleDebug('=== Re-evaluation complete ===');
             }
         },
-        [isKeySet, categories, accounts, banks, updateTransaction],
+        [isKeySet, categories, accounts, banks, labels, updateTransaction],
     );
 
     async function handleBulkReEvaluateRules() {
@@ -757,6 +779,7 @@ export default function Transactions({ categories, accounts, banks }: Props) {
                     categories,
                     accounts,
                     banks,
+                    labels,
                     key,
                 );
 
@@ -884,12 +907,20 @@ export default function Transactions({ categories, accounts, banks }: Props) {
                 categories,
                 accounts,
                 banks,
+                labels,
                 onEdit: setEditTransaction,
                 onDelete: setDeleteTransaction,
                 onUpdate: updateTransaction,
                 onReEvaluateRules: handleReEvaluateRules,
             }),
-        [accounts, banks, categories, updateTransaction, handleReEvaluateRules],
+        [
+            accounts,
+            banks,
+            categories,
+            labels,
+            updateTransaction,
+            handleReEvaluateRules,
+        ],
     );
 
     const table = useReactTable({
@@ -1041,6 +1072,52 @@ export default function Transactions({ categories, accounts, banks }: Props) {
         }
     }
 
+    async function handleBulkLabelsChange(labelIds: string[]) {
+        const selectedIds = Object.keys(rowSelection);
+        if (selectedIds.length === 0 || labelIds.length === 0) {
+            return;
+        }
+
+        setIsBulkUpdating(true);
+        try {
+            await transactionSyncService.updateMany(selectedIds, {
+                label_ids: labelIds,
+            });
+
+            const selectedLabels = labels.filter((l) =>
+                labelIds.includes(l.id),
+            );
+
+            setTransactions((previous) =>
+                previous.map((transaction) => {
+                    if (selectedIds.includes(transaction.id.toString())) {
+                        const existingLabels = transaction.labels || [];
+                        const newLabels = [
+                            ...existingLabels,
+                            ...selectedLabels.filter(
+                                (l) =>
+                                    !existingLabels.some(
+                                        (el) => el.id === l.id,
+                                    ),
+                            ),
+                        ];
+                        return {
+                            ...transaction,
+                            labels: newLabels,
+                        };
+                    }
+                    return transaction;
+                }),
+            );
+
+            setRowSelection({});
+        } catch (error) {
+            console.error('Failed to update transactions with labels:', error);
+        } finally {
+            setIsBulkUpdating(false);
+        }
+    }
+
     function handleClearSelection() {
         setRowSelection({});
     }
@@ -1081,6 +1158,7 @@ export default function Transactions({ categories, accounts, banks }: Props) {
                         filters={filters}
                         onFiltersChange={setFilters}
                         categories={categories}
+                        labels={labels}
                         accounts={accounts}
                         isKeySet={isKeySet}
                         actions={
@@ -1180,6 +1258,7 @@ export default function Transactions({ categories, accounts, banks }: Props) {
                 categories={categories}
                 accounts={accounts}
                 banks={banks}
+                labels={labels}
                 open={!!editTransaction}
                 onOpenChange={(open) => !open && setEditTransaction(null)}
                 onSuccess={updateTransaction}
@@ -1191,6 +1270,7 @@ export default function Transactions({ categories, accounts, banks }: Props) {
                 categories={categories}
                 accounts={accounts}
                 banks={banks}
+                labels={labels}
                 open={createDialogOpen}
                 onOpenChange={setCreateDialogOpen}
                 onSuccess={() => {}}
@@ -1244,7 +1324,9 @@ export default function Transactions({ categories, accounts, banks }: Props) {
             <BulkActionsBar
                 selectedCount={Object.keys(rowSelection).length}
                 categories={categories}
+                labels={labels}
                 onCategoryChange={handleBulkCategoryChange}
+                onLabelsChange={handleBulkLabelsChange}
                 onDelete={handleBulkDeleteClick}
                 onReEvaluateRules={handleBulkReEvaluateRules}
                 onClear={handleClearSelection}
diff --git a/resources/js/services/label-sync.ts b/resources/js/services/label-sync.ts
new file mode 100644
index 00000000..b02cb08e
--- /dev/null
+++ b/resources/js/services/label-sync.ts
@@ -0,0 +1,102 @@
+import { store } from '@/actions/App/Http/Controllers/Settings/LabelController';
+import { SyncManager } from '@/lib/sync-manager';
+import type { Label } from '@/types/label';
+import type { UUID } from '@/types/uuid';
+
+class LabelSyncService {
+    private syncManager: SyncManager;
+
+    constructor() {
+        this.syncManager = new SyncManager({
+            storeName: 'labels',
+            endpoint: '/api/sync/labels',
+        });
+    }
+
+    async sync() {
+        return await this.syncManager.sync();
+    }
+
+    async getAll(): Promise<Label[]> {
+        return await this.syncManager.getAll<Label>();
+    }
+
+    async getById(id: UUID): Promise<Label | null> {
+        return await this.syncManager.getById<Label>(id);
+    }
+
+    async create(data: { name: string; color: string }): Promise<Label> {
+        const csrfToken = decodeURIComponent(
+            document.cookie
+                .split('; ')
+                .find((row) => row.startsWith('XSRF-TOKEN='))
+                ?.split('=')[1] || '',
+        );
+
+        const response = await fetch(store().url, {
+            method: 'POST',
+            headers: {
+                'Content-Type': 'application/json',
+                Accept: 'application/json',
+                'X-Requested-With': 'XMLHttpRequest',
+                'X-XSRF-TOKEN': csrfToken,
+            },
+            credentials: 'same-origin',
+            body: JSON.stringify(data),
+        });
+
+        if (!response.ok) {
+            const errorData = await response.json().catch(() => null);
+            console.error('Failed to create label:', errorData);
+            throw new Error(errorData?.message || 'Failed to create label');
+        }
+
+        const result = await response.json();
+        const label = result.data as Label;
+
+        // Store the label in IndexedDB
+        const { db } = await import('@/lib/dexie-db');
+        await db.labels.put(label);
+
+        return label;
+    }
+
+    async update(id: UUID, data: Partial<Label>): Promise<void> {
+        await this.syncManager.updateLocal<Label>(id, data);
+    }
+
+    async delete(id: UUID): Promise<void> {
+        await this.syncManager.deleteLocal(id);
+    }
+
+    async getLastSyncTime(): Promise<string | null> {
+        return await this.syncManager.getLastSyncTime();
+    }
+
+    isSyncing(): boolean {
+        return this.syncManager.isSyncing();
+    }
+
+    async findOrCreate(
+        name: string,
+        color: string = 'blue',
+    ): Promise<Label | null> {
+        const labels = await this.getAll();
+        const existing = labels.find(
+            (l) => l.name.toLowerCase() === name.toLowerCase(),
+        );
+
+        if (existing) {
+            return existing;
+        }
+
+        try {
+            return await this.create({ name, color });
+        } catch (error) {
+            console.error('Failed to create label:', error);
+            return null;
+        }
+    }
+}
+
+export const labelSyncService = new LabelSyncService();
diff --git a/resources/js/services/transaction-sync.ts b/resources/js/services/transaction-sync.ts
index f915f0ad..e38e507e 100644
--- a/resources/js/services/transaction-sync.ts
+++ b/resources/js/services/transaction-sync.ts
@@ -17,10 +17,15 @@ export interface Transaction {
     currency_code: string;
     notes: string | null;
     notes_iv: string | null;
+    label_ids?: UUID[];
     created_at: string;
     updated_at: string;
 }
 
+interface TransactionUpdateData extends Partial<Transaction> {
+    label_ids?: string[];
+}
+
 class TransactionSyncService {
     private syncManager: SyncManager;
 
@@ -28,10 +33,20 @@ class TransactionSyncService {
         this.syncManager = new SyncManager({
             storeName: 'transactions',
             endpoint: '/api/sync/transactions',
-            transformFromServer: (data) => ({
-                ...data,
-                transaction_date: String(data.transaction_date).slice(0, 10),
-            }),
+            transformFromServer: (data) => {
+                // Extract label_ids from labels array if present
+                const label_ids = data.labels?.map((l: { id: string }) => l.id);
+                // eslint-disable-next-line @typescript-eslint/no-unused-vars
+                const { labels, ...rest } = data;
+                return {
+                    ...rest,
+                    transaction_date: String(data.transaction_date).slice(
+                        0,
+                        10,
+                    ),
+                    label_ids: label_ids || [],
+                };
+            },
         });
     }
 
@@ -104,17 +119,77 @@ class TransactionSyncService {
         }
     }
 
-    async update(id: string, data: Partial<Transaction>): Promise<void> {
+    async update(
+        id: string,
+        data: TransactionUpdateData,
+    ): Promise<Transaction | void> {
         const existing = await this.getById(id);
 
         if (!existing) {
             throw new Error('Transaction not found');
         }
 
+        const { label_ids, ...transactionData } = data;
         const timestamp = new Date().toISOString();
+
+        // If label_ids are provided, we need to sync with the server immediately
+        if (label_ids !== undefined) {
+            const csrfToken = decodeURIComponent(
+                document.cookie
+                    .split('; ')
+                    .find((row) => row.startsWith('XSRF-TOKEN='))
+                    ?.split('=')[1] || '',
+            );
+
+            const response = await fetch(`/api/sync/transactions/${id}`, {
+                method: 'PATCH',
+                headers: {
+                    'Content-Type': 'application/json',
+                    Accept: 'application/json',
+                    'X-Requested-With': 'XMLHttpRequest',
+                    'X-XSRF-TOKEN': csrfToken,
+                },
+                credentials: 'same-origin',
+                body: JSON.stringify({
+                    ...existing,
+                    ...transactionData,
+                    label_ids,
+                }),
+            });
+
+            if (!response.ok) {
+                throw new Error('Failed to update transaction');
+            }
+
+            const result = await response.json();
+            const serverData = result.data;
+
+            // Extract label_ids from labels array
+            const serverLabelIds = serverData.labels?.map(
+                (l: { id: string }) => l.id,
+            );
+            // eslint-disable-next-line @typescript-eslint/no-unused-vars
+            const { labels: _labels, ...restServerData } = serverData;
+
+            const updatedTransaction: Transaction = {
+                ...restServerData,
+                transaction_date: String(serverData.transaction_date).slice(
+                    0,
+                    10,
+                ),
+                label_ids: serverLabelIds || [],
+            };
+
+            // Update local storage with transformed data (label_ids instead of labels)
+            await db.transactions.put(updatedTransaction);
+
+            return updatedTransaction;
+        }
+
+        // No label_ids, use the normal offline-first approach
         const updated = {
             ...existing,
-            ...data,
+            ...transactionData,
             updated_at: timestamp,
         };
 
@@ -127,8 +202,38 @@ class TransactionSyncService {
         });
     }
 
-    async updateMany(ids: string[], data: Partial<Transaction>): Promise<void> {
+    async updateMany(
+        ids: string[],
+        data: TransactionUpdateData,
+    ): Promise<void> {
         const timestamp = new Date().toISOString();
+        const { label_ids, ...transactionData } = data;
+
+        if (label_ids !== undefined) {
+            try {
+                const response = await fetch('/transactions/bulk', {
+                    method: 'PATCH',
+                    headers: {
+                        'Content-Type': 'application/json',
+                        Accept: 'application/json',
+                        'X-Requested-With': 'XMLHttpRequest',
+                    },
+                    credentials: 'same-origin',
+                    body: JSON.stringify({
+                        transaction_ids: ids,
+                        label_ids: label_ids,
+                        ...transactionData,
+                    }),
+                });
+
+                if (!response.ok) {
+                    throw new Error('Failed to bulk update transactions');
+                }
+            } catch (error) {
+                console.error('Failed to update transactions via API:', error);
+                throw error;
+            }
+        }
 
         for (const id of ids) {
             const existing = await this.getById(id);
@@ -140,7 +245,7 @@ class TransactionSyncService {
 
             const updated = {
                 ...existing,
-                ...data,
+                ...transactionData,
                 updated_at: timestamp,
             };
 
diff --git a/resources/js/types/automation-rule.ts b/resources/js/types/automation-rule.ts
index 5f06784a..52e79ad6 100644
--- a/resources/js/types/automation-rule.ts
+++ b/resources/js/types/automation-rule.ts
@@ -1,4 +1,5 @@
 import type { Category } from './category';
+import type { Label } from './label';
 import { UUID } from './uuid';
 
 export interface AutomationRule {
@@ -11,26 +12,35 @@ export interface AutomationRule {
     action_note: string | null;
     action_note_iv: string | null;
     category?: Category;
+    labels?: Label[];
     created_at: string;
     updated_at: string;
     deleted_at: string | null;
 }
 
 export interface RuleAction {
-    type: 'category' | 'note' | 'both';
+    type: 'category' | 'note' | 'labels' | 'multiple';
     category?: Category;
+    labels?: Label[];
     hasNote: boolean;
+    hasLabels: boolean;
 }
 
 export function getRuleActions(rule: AutomationRule): RuleAction {
     const hasCategory = rule.action_category_id !== null;
     const hasNote = rule.action_note !== null;
+    const hasLabels = (rule.labels?.length ?? 0) > 0;
 
-    if (hasCategory && hasNote) {
+    const actionCount =
+        (hasCategory ? 1 : 0) + (hasNote ? 1 : 0) + (hasLabels ? 1 : 0);
+
+    if (actionCount > 1) {
         return {
-            type: 'both',
+            type: 'multiple',
             category: rule.category,
-            hasNote: true,
+            labels: rule.labels,
+            hasNote,
+            hasLabels,
         };
     }
 
@@ -39,25 +49,42 @@ export function getRuleActions(rule: AutomationRule): RuleAction {
             type: 'category',
             category: rule.category,
             hasNote: false,
+            hasLabels: false,
+        };
+    }
+
+    if (hasLabels) {
+        return {
+            type: 'labels',
+            labels: rule.labels,
+            hasNote: false,
+            hasLabels: true,
         };
     }
 
     return {
         type: 'note',
         hasNote: true,
+        hasLabels: false,
     };
 }
 
 export function formatRuleActions(rule: AutomationRule): string {
     const actions = getRuleActions(rule);
+    const parts: string[] = [];
 
-    if (actions.type === 'both') {
-        return `${actions.category?.name} and add note`;
+    if (actions.category) {
+        parts.push(actions.category.name);
     }
 
-    if (actions.type === 'category') {
-        return actions.category?.name || '';
+    if (actions.hasLabels && actions.labels) {
+        const labelNames = actions.labels.map((l) => l.name).join(', ');
+        parts.push(`labels: ${labelNames}`);
     }
 
-    return 'Add note';
+    if (actions.hasNote) {
+        parts.push('add note');
+    }
+
+    return parts.length > 0 ? parts.join(' + ') : 'No actions';
 }
diff --git a/resources/js/types/label.ts b/resources/js/types/label.ts
new file mode 100644
index 00000000..f7550e3e
--- /dev/null
+++ b/resources/js/types/label.ts
@@ -0,0 +1,156 @@
+import { UUID } from './uuid';
+
+export interface Label {
+    id: UUID;
+    user_id: UUID;
+    name: string;
+    color: string;
+    created_at: string;
+    updated_at: string;
+    deleted_at: string | null;
+}
+
+export const LABEL_COLORS = [
+    'amber',
+    'blue',
+    'cyan',
+    'emerald',
+    'fuchsia',
+    'gray',
+    'green',
+    'indigo',
+    'lime',
+    'neutral',
+    'orange',
+    'pink',
+    'purple',
+    'red',
+    'rose',
+    'slate',
+    'stone',
+    'teal',
+    'violet',
+    'yellow',
+] as const;
+
+export type LabelColor = (typeof LABEL_COLORS)[number];
+
+export function getLabelColorClasses(color: string): {
+    bg: string;
+    text: string;
+    border: string;
+} {
+    const colorMap: Record<
+        string,
+        { bg: string; text: string; border: string }
+    > = {
+        amber: {
+            bg: 'bg-amber-100 dark:bg-amber-900/30',
+            text: 'text-amber-700 dark:text-amber-300',
+            border: 'border-amber-300 dark:border-amber-700',
+        },
+        blue: {
+            bg: 'bg-blue-100 dark:bg-blue-900/30',
+            text: 'text-blue-700 dark:text-blue-300',
+            border: 'border-blue-300 dark:border-blue-700',
+        },
+        cyan: {
+            bg: 'bg-cyan-100 dark:bg-cyan-900/30',
+            text: 'text-cyan-700 dark:text-cyan-300',
+            border: 'border-cyan-300 dark:border-cyan-700',
+        },
+        emerald: {
+            bg: 'bg-emerald-100 dark:bg-emerald-900/30',
+            text: 'text-emerald-700 dark:text-emerald-300',
+            border: 'border-emerald-300 dark:border-emerald-700',
+        },
+        fuchsia: {
+            bg: 'bg-fuchsia-100 dark:bg-fuchsia-900/30',
+            text: 'text-fuchsia-700 dark:text-fuchsia-300',
+            border: 'border-fuchsia-300 dark:border-fuchsia-700',
+        },
+        gray: {
+            bg: 'bg-gray-100 dark:bg-gray-900/30',
+            text: 'text-gray-700 dark:text-gray-300',
+            border: 'border-gray-300 dark:border-gray-700',
+        },
+        green: {
+            bg: 'bg-green-100 dark:bg-green-900/30',
+            text: 'text-green-700 dark:text-green-300',
+            border: 'border-green-300 dark:border-green-700',
+        },
+        indigo: {
+            bg: 'bg-indigo-100 dark:bg-indigo-900/30',
+            text: 'text-indigo-700 dark:text-indigo-300',
+            border: 'border-indigo-300 dark:border-indigo-700',
+        },
+        lime: {
+            bg: 'bg-lime-100 dark:bg-lime-900/30',
+            text: 'text-lime-700 dark:text-lime-300',
+            border: 'border-lime-300 dark:border-lime-700',
+        },
+        neutral: {
+            bg: 'bg-neutral-100 dark:bg-neutral-900/30',
+            text: 'text-neutral-700 dark:text-neutral-300',
+            border: 'border-neutral-300 dark:border-neutral-700',
+        },
+        orange: {
+            bg: 'bg-orange-100 dark:bg-orange-900/30',
+            text: 'text-orange-700 dark:text-orange-300',
+            border: 'border-orange-300 dark:border-orange-700',
+        },
+        pink: {
+            bg: 'bg-pink-100 dark:bg-pink-900/30',
+            text: 'text-pink-700 dark:text-pink-300',
+            border: 'border-pink-300 dark:border-pink-700',
+        },
+        purple: {
+            bg: 'bg-purple-100 dark:bg-purple-900/30',
+            text: 'text-purple-700 dark:text-purple-300',
+            border: 'border-purple-300 dark:border-purple-700',
+        },
+        red: {
+            bg: 'bg-red-100 dark:bg-red-900/30',
+            text: 'text-red-700 dark:text-red-300',
+            border: 'border-red-300 dark:border-red-700',
+        },
+        rose: {
+            bg: 'bg-rose-100 dark:bg-rose-900/30',
+            text: 'text-rose-700 dark:text-rose-300',
+            border: 'border-rose-300 dark:border-rose-700',
+        },
+        slate: {
+            bg: 'bg-slate-100 dark:bg-slate-900/30',
+            text: 'text-slate-700 dark:text-slate-300',
+            border: 'border-slate-300 dark:border-slate-700',
+        },
+        stone: {
+            bg: 'bg-stone-100 dark:bg-stone-900/30',
+            text: 'text-stone-700 dark:text-stone-300',
+            border: 'border-stone-300 dark:border-stone-700',
+        },
+        teal: {
+            bg: 'bg-teal-100 dark:bg-teal-900/30',
+            text: 'text-teal-700 dark:text-teal-300',
+            border: 'border-teal-300 dark:border-teal-700',
+        },
+        violet: {
+            bg: 'bg-violet-100 dark:bg-violet-900/30',
+            text: 'text-violet-700 dark:text-violet-300',
+            border: 'border-violet-300 dark:border-violet-700',
+        },
+        yellow: {
+            bg: 'bg-yellow-100 dark:bg-yellow-900/30',
+            text: 'text-yellow-700 dark:text-yellow-300',
+            border: 'border-yellow-300 dark:border-yellow-700',
+        },
+    };
+
+    return (
+        colorMap[color] || {
+            bg: 'bg-gray-100 dark:bg-gray-900/30',
+            text: 'text-gray-700 dark:text-gray-300',
+            border: 'border-gray-300 dark:border-gray-700',
+        }
+    );
+}
diff --git a/resources/js/types/transaction.ts b/resources/js/types/transaction.ts
index f83d805e..933ab9b3 100644
--- a/resources/js/types/transaction.ts
+++ b/resources/js/types/transaction.ts
@@ -1,5 +1,6 @@
 import { type Account, type Bank } from './account';
 import { type Category } from './category';
+import { type Label } from './label';
 import { UUID } from './uuid';
 
 export type TransactionSource = 'manually_created' | 'imported';
@@ -17,6 +18,7 @@ export interface Transaction {
     notes: string | null;
     notes_iv: string | null;
     source: TransactionSource;
+    label_ids?: UUID[];
     created_at: string;
     updated_at: string;
 }
@@ -27,6 +29,7 @@ export interface DecryptedTransaction extends Transaction {
     account?: Account;
     category?: Category | null;
     bank?: Bank;
+    labels?: Label[];
 }
 
 export interface TransactionFilters {
@@ -36,5 +39,6 @@ export interface TransactionFilters {
     amountMax: number | null;
     categoryIds: UUID[];
     accountIds: UUID[];
+    labelIds: UUID[];
     searchText: string;
 }
diff --git a/routes/api.php b/routes/api.php
index 8bb1d34f..4ccb8945 100644
--- a/routes/api.php
+++ b/routes/api.php
@@ -8,6 +8,7 @@ use App\Http\Controllers\Sync\AccountSyncController;
 use App\Http\Controllers\Sync\AutomationRuleSyncController;
 use App\Http\Controllers\Sync\BankSyncController;
 use App\Http\Controllers\Sync\CategorySyncController;
+use App\Http\Controllers\Sync\LabelSyncController;
 use App\Http\Controllers\Sync\TransactionSyncController;
 use Illuminate\Support\Facades\Route;
 
@@ -19,6 +20,7 @@ Route::middleware(['web', 'auth'])->group(function () {
     // Sync
     Route::prefix('sync')->group(function () {
         Route::get('categories', [CategorySyncController::class, 'index']);
+        Route::get('labels', [LabelSyncController::class, 'index']);
         Route::get('accounts', [AccountSyncController::class, 'index']);
         Route::get('banks', [BankSyncController::class, 'index']);
         Route::get('automation-rules', [AutomationRuleSyncController::class, 'index']);
diff --git a/routes/settings.php b/routes/settings.php
index a5f65afa..df26db71 100644
--- a/routes/settings.php
+++ b/routes/settings.php
@@ -3,6 +3,7 @@
 use App\Http\Controllers\Settings\AccountController;
 use App\Http\Controllers\Settings\BankController;
 use App\Http\Controllers\Settings\CategoryController;
+use App\Http\Controllers\Settings\LabelController;
 use App\Http\Controllers\Settings\PasswordController;
 use App\Http\Controllers\Settings\ProfileController;
 use App\Http\Controllers\Settings\TwoFactorAuthenticationController;
@@ -36,6 +37,11 @@ Route::middleware('auth')->group(function () {
     Route::patch('settings/categories/{category}', [CategoryController::class, 'update'])->name('categories.update');
     Route::delete('settings/categories/{category}', [CategoryController::class, 'destroy'])->name('categories.destroy');
 
+    Route::get('settings/labels', [LabelController::class, 'index'])->name('labels.index');
+    Route::post('settings/labels', [LabelController::class, 'store'])->name('labels.store');
+    Route::patch('settings/labels/{label}', [LabelController::class, 'update'])->name('labels.update');
+    Route::delete('settings/labels/{label}', [LabelController::class, 'destroy'])->name('labels.destroy');
+
     Route::get('settings/automation-rules', [\App\Http\Controllers\Settings\AutomationRuleController::class, 'index'])->name('automation-rules.index');
     Route::post('settings/automation-rules', [\App\Http\Controllers\Settings\AutomationRuleController::class, 'store'])->name('automation-rules.store');
     Route::patch('settings/automation-rules/{automationRule}', [\App\Http\Controllers\Settings\AutomationRuleController::class, 'update'])->name('automation-rules.update');
diff --git a/tests/Feature/LabelTest.php b/tests/Feature/LabelTest.php
new file mode 100644
index 00000000..01e64ef5
--- /dev/null
+++ b/tests/Feature/LabelTest.php
@@ -0,0 +1,201 @@
+<?php
+
+use App\Models\Label;
+use App\Models\User;
+
+test('authenticated users can create a label', function () {
+    $user = User::factory()->create();
+
+    $labelData = [
+        'name' => 'Important',
+        'color' => 'blue',
+    ];
+
+    $response = $this->actingAs($user)->post(route('labels.store'), $labelData);
+
+    $response->assertRedirect(route('labels.index'));
+
+    $this->assertDatabaseHas('labels', [
+        'user_id' => $user->id,
+        'name' => 'Important',
+        'color' => 'blue',
+    ]);
+});
+
+test('label name is required', function () {
+    $user = User::factory()->create();
+
+    $response = $this->actingAs($user)->postJson(route('labels.store'), [
+        'color' => 'blue',
+    ]);
+
+    $response->assertUnprocessable();
+    $response->assertJsonValidationErrors(['name']);
+});
+
+test('label color is required', function () {
+    $user = User::factory()->create();
+
+    $response = $this->actingAs($user)->postJson(route('labels.store'), [
+        'name' => 'Important',
+    ]);
+
+    $response->assertUnprocessable();
+    $response->assertJsonValidationErrors(['color']);
+});
+
+test('label color must be valid', function () {
+    $user = User::factory()->create();
+
+    $response = $this->actingAs($user)->postJson(route('labels.store'), [
+        'name' => 'Important',
+        'color' => 'invalid-color',
+    ]);
+
+    $response->assertUnprocessable();
+    $response->assertJsonValidationErrors(['color']);
+});
+
+test('label names are unique per user', function () {
+    $user = User::factory()->create();
+
+    Label::factory()->create([
+        'user_id' => $user->id,
+        'name' => 'Urgent',
+    ]);
+
+    $response = $this->actingAs($user)->postJson(route('labels.store'), [
+        'name' => 'Urgent',
+        'color' => 'red',
+    ]);
+
+    $response->assertUnprocessable();
+    $response->assertJsonValidationErrors(['name']);
+});
+
+test('different users can have labels with the same name', function () {
+    $user1 = User::factory()->create();
+    $user2 = User::factory()->create();
+
+    Label::factory()->create([
+        'user_id' => $user1->id,
+        'name' => 'Important',
+    ]);
+
+    $response = $this->actingAs($user2)->post(route('labels.store'), [
+        'name' => 'Important',
+        'color' => 'blue',
+    ]);
+
+    $response->assertRedirect(route('labels.index'));
+
+    $this->assertDatabaseHas('labels', [
+        'user_id' => $user2->id,
+        'name' => 'Important',
+        'color' => 'blue',
+    ]);
+});
+
+test('authenticated users can update their own label', function () {
+    $user = User::factory()->create();
+    $label = Label::factory()->create(['user_id' => $user->id]);
+
+    $updateData = [
+        'name' => 'Updated Name',
+        'color' => 'green',
+    ];
+
+    $response = $this->actingAs($user)->patch(
+        route('labels.update', $label),
+        $updateData
+    );
+
+    $response->assertRedirect(route('labels.index'));
+
+    $this->assertDatabaseHas('labels', [
+        'id' => $label->id,
+        'name' => 'Updated Name',
+        'color' => 'green',
+    ]);
+});
+
+test('users cannot update labels they do not own', function () {
+    $user = User::factory()->create();
+    $otherUser = User::factory()->create();
+    $label = Label::factory()->create(['user_id' => $otherUser->id]);
+
+    $response = $this->actingAs($user)->patch(
+        route('labels.update', $label),
+        [
+            'name' => 'Updated Name',
+            'color' => 'green',
+        ]
+    );
+
+    $response->assertForbidden();
+});
+
+test('authenticated users can delete their own label', function () {
+    $user = User::factory()->create();
+    $label = Label::factory()->create(['user_id' => $user->id]);
+
+    $response = $this->actingAs($user)->delete(route('labels.destroy', $label));
+
+    $response->assertRedirect(route('labels.index'));
+
+    $this->assertSoftDeleted('labels', [
+        'id' => $label->id,
+    ]);
+});
+
+test('users cannot delete labels they do not own', function () {
+    $user = User::factory()->create();
+    $otherUser = User::factory()->create();
+    $label = Label::factory()->create(['user_id' => $otherUser->id]);
+
+    $response = $this->actingAs($user)->delete(route('labels.destroy', $label));
+
+    $response->assertForbidden();
+
+    $this->assertDatabaseHas('labels', [
+        'id' => $label->id,
+        'deleted_at' => null,
+    ]);
+});
+
+test('guests cannot access label management', function () {
+    $response = $this->postJson(route('labels.store'), []);
+    $response->assertUnauthorized();
+});
+
+test('creating a label with the same name as a deleted label creates a new one', function () {
+    $user = User::factory()->create();
+    $label = Label::factory()->create([
+        'user_id' => $user->id,
+        'name' => 'Wedding',
+        'color' => 'blue',
+    ]);
+    $originalId = $label->id;
+
+    $this->actingAs($user)->delete(route('labels.destroy', $label));
+
+    $this->assertSoftDeleted('labels', ['id' => $originalId]);
+
+    $response = $this->actingAs($user)->postJson(route('labels.store'), [
+        'name' => 'Wedding',
+        'color' => 'teal',
+    ]);
+
+    $response->assertCreated();
+
+    $newLabel = Label::where('user_id', $user->id)
+        ->where('name', 'Wedding')
+        ->whereNull('deleted_at')
+        ->first();
+
+    expect($newLabel)->not->toBeNull();
+    expect($newLabel->id)->not->toBe($originalId);
+    expect($newLabel->color)->toBe('teal');
+
+    $this->assertSoftDeleted('labels', ['id' => $originalId]);
+});
diff --git a/tests/Feature/Sync/LabelSyncTest.php b/tests/Feature/Sync/LabelSyncTest.php
new file mode 100644
index 00000000..e766ff36
--- /dev/null
+++ b/tests/Feature/Sync/LabelSyncTest.php
@@ -0,0 +1,54 @@
+<?php
+
+use App\Models\Label;
+use App\Models\User;
+
+use function Pest\Laravel\actingAs;
+use function Pest\Laravel\getJson;
+
+beforeEach(function () {
+    $this->user = User::factory()->create();
+});
+
+it('returns all labels for authenticated user', function () {
+    actingAs($this->user);
+
+    Label::factory()
+        ->count(3)
+        ->create(['user_id' => $this->user->id]);
+
+    Label::factory()
+        ->count(2)
+        ->create();
+
+    $response = getJson('/api/sync/labels');
+
+    $response->assertSuccessful();
+    $response->assertJsonCount(3, 'data');
+});
+
+it('returns only labels updated after specified timestamp', function () {
+    actingAs($this->user);
+
+    $oldLabel = Label::factory()->create([
+        'user_id' => $this->user->id,
+        'updated_at' => now()->subDays(2),
+    ]);
+
+    $newLabel = Label::factory()->create([
+        'user_id' => $this->user->id,
+        'updated_at' => now(),
+    ]);
+
+    $response = getJson('/api/sync/labels?since='.now()->subDay()->toIso8601String());
+
+    $response->assertSuccessful();
+    $response->assertJsonCount(1, 'data');
+    $response->assertJsonPath('data.0.id', $newLabel->id);
+});
+
+it('requires authentication', function () {
+    $response = getJson('/api/sync/labels');
+
+    $response->assertUnauthorized();
+});