Alaska has no state income tax, so there is no Alaska withholding tax to deduct from employee paychecks. Employers in the state only withhold federal taxes from wages, and the one state-level payroll contribution is unemployment insurance, which both the employer and the employee pay. For individuals, the only “Alaska” withholding you may ever see is federal backup withholding applied to the Permanent Fund Dividend.
No State Income Tax to Withhold
Alaska is one of a handful of states with no individual income tax.1Department of Commerce, Community, and Economic Development. Alaska Tax Facts That applies to everyone earning wages in the state: residents, nonresidents, full-time workers, seasonal employees, and independent contractors. There is no state withholding certificate, no state W-4 equivalent, and no state income tax return for individuals to file. If you moved to Alaska from a state that does tax income, the payroll change is simple because there is nothing to calculate on the state side.
Federal Withholding Still Applies
The absence of a state income tax doesn’t change anything on the federal side. Every Alaska employer must:
- Withhold federal income tax from each employee’s wages based on the W-4 the employee submits.
- Withhold the employee’s share of Social Security tax at 6.2% and Medicare tax at 1.45%, and pay the matching employer share of both.
- Pay federal unemployment tax (FUTA) on the first $7,000 of each employee’s wages.
The standard FUTA rate is 6.0%, but employers who pay their Alaska state unemployment contributions on time generally receive a 5.4% credit, bringing the effective rate down to 0.6%.2Internal Revenue Service. FUTA Credit Reduction That credit shrinks if a state carries outstanding federal loans to its unemployment trust fund. Alaska has not been on the credit reduction list in recent years, so most Alaska employers pay the reduced 0.6% rate.
Alaska Unemployment Insurance Is the Only State Payroll Tax
The one state-level payroll obligation is unemployment insurance, and Alaska is unusual in splitting it between the employer and the employee. Most states place the entire UI burden on the employer.
For 2026, the taxable wage base is $54,200 per employee, up from $51,700 in 2025.3Alaska Department of Labor and Workforce Development. 2026 Unemployment Insurance Tax Rates Contributions stop for the rest of the calendar year once an employee’s year-to-date wages exceed that threshold.
Employer Rates
Employer rates for 2026 range from 1.00% to 5.40%, assigned through an experience rating that reflects the employer’s history of unemployment claims.3Alaska Department of Labor and Workforce Development. 2026 Unemployment Insurance Tax Rates An employer with few layoffs lands at the low end; one with frequent claims pays more. New employers without an established history are assigned a 1.00% rate until the state has enough data to calculate a personalized rate.4Alaska Department of Labor and Workforce Development. First Time Filers
Employee Share
Every employee pays 0.50% of wages up to the taxable wage base. The employer is responsible for deducting this amount from each paycheck and remitting it with the employer contribution. For a new employer, the combined rate is 1.50%: 1.00% from the employer and 0.50% from the employee.4Alaska Department of Labor and Workforce Development. First Time Filers This employee deduction is the closest thing to a state withholding tax that Alaska has.
Quarterly Reporting
Employers file the Alaska Quarterly Contribution Report (Form TQ01C) every quarter, even quarters in which no wages were paid.5Alaska Department of Labor and Workforce Development. Alaska Quarterly Contribution Report (Form TQ01C) The report can be submitted online through the Department of Labor and Workforce Development.
Workers’ Compensation Is Required but Not Withheld
Alaska requires every employer with one or more employees to carry workers’ compensation insurance or qualify as an approved self-insurer. This isn’t a payroll tax and nothing is deducted from employee wages for it, but it’s an unavoidable cost of employing people in the state. Alaska has no state workers’ compensation fund, so coverage must come from the private market, and the state does not honor reciprocity agreements, meaning out-of-state employers sending workers into Alaska need Alaska-specific coverage.6Alaska Department of Labor and Workforce Development. Workers’ Compensation Requirements for Employer
Backup Withholding on the Permanent Fund Dividend
Alaska does not tax the Permanent Fund Dividend, but the IRS does. The state reports each adult’s dividend on a 1099-MISC, and you must include the full amount on your federal return.7State of Alaska Department of Revenue. Tax Information – Permanent Fund Dividend
If you don’t provide the PFD program with a valid taxpayer identification number, or if the IRS has flagged you for underreporting interest and dividend income, the state will apply federal backup withholding at 24% before sending your dividend.8Internal Revenue Service. Backup Withholding Keeping your Social Security number current with the PFD Division is enough to avoid it.
What About Corporations?
Corporations earning income from Alaska sources owe a state corporate net income tax that tops out at 9.4%, filed on Form 6000 (or Form 6100 for oil and gas corporations) with the Department of Revenue.9Justia Law. Alaska Code 43.20.011 – Tax on Corporations10Alaska Department of Revenue. Tax Division – Corporation Income Tax Forms This is a return filed by the corporation on its own income, not a wage withholding. S corporations, partnerships, and LLCs taxed as pass-throughs for federal purposes generally owe nothing, because their income passes to individual owners and Alaska doesn’t tax individual income.