No, Alaska does not have a state income tax on individuals. Wages, investment income, and retirement distributions are not subject to any state-level withholding, which puts Alaska among eight states with no broad-based personal income tax, alongside Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.1Department of Commerce, Community, and Economic Development. Alaska Tax Facts Federal income tax still applies in full, and local governments collect their own taxes, so your overall bill as an Alaska resident is lower than in most states but it is not zero.
What Alaska Residents Actually Pay
With no state income tax and no statewide sales tax, your tax burden comes from four main sources: local property tax, local sales tax in some communities, state excise taxes on specific products, and a small payroll deduction for unemployment insurance.
Local Property Tax
Property tax is the main funding source for local government across Alaska. State law caps the rate at 30 mills (3%) of assessed value in any given year.2Justia. Alaska Code 29.45.090 – Tax Limitation Actual rates run well below the ceiling. The average effective rate statewide is around 0.94%, close to the national median.
Every municipality must exempt the first $150,000 of assessed value on the primary residence of a resident who is 65 or older, a disabled veteran with at least 50% service-connected disability, or a qualifying surviving spouse.3Department of Commerce, Community, and Economic Development. Property Tax Exemptions in Alaska Application deadlines vary by locality, and some boroughs offer additional exemptions on top of the state-mandated one, so your local assessor’s office is the right place to check.
Local Sales Tax
More than 100 Alaska municipalities levy a local sales tax, with rates ranging from 1% to 7% and most falling between 2% and 5%.1Department of Commerce, Community, and Economic Development. Alaska Tax Facts Anchorage and Fairbanks, the two largest cities, charge nothing. Smaller and rural communities tend to lean on sales tax harder because their property tax base is thinner. Some places also tack on special taxes for lodging and vehicle rentals.
State Excise Taxes
The state collects excise taxes that are built into the price you pay at the register:
- Motor fuel is taxed at 8 cents per gallon on gasoline and diesel, with a small surcharge bringing the effective total to roughly 9 cents. That ranks among the lowest fuel taxes in the country.4U.S. Energy Information Administration. Many States Slightly Increased Their Taxes and Fees on Gasoline in the Past Year
- Cigarettes are taxed at $2.00 per pack of 20.5Justia. Alaska Code 43.50.190 – Additional Tax Levy on Cigarettes
- Alcohol runs $12.80 per gallon on distilled spirits, $2.50 per gallon on wine, and $1.07 per gallon on beer. Alaska’s spirits and beer rates are among the highest in the nation.
- Marijuana flower is taxed at $50 per ounce at the grower level, with lower rates on trim and immature buds.
Unemployment Insurance Withholding
Alaska is one of only three states where employees contribute to the state unemployment insurance fund. In 2026, employers withhold 0.50% of your wages for this purpose, on top of the employer’s own share.6Alaska Department of Labor. 2026 Unemployment Insurance Tax Rates It’s small but it will show up on your pay stub.
Federal Taxes Still Apply
Federal income tax, Social Security (6.2%), and Medicare (1.45%) come out of every paycheck regardless of where you live. Self-employed Alaska residents owe the full 15.3% self-employment tax.
If you itemize, your SALT deduction is limited to property and local sales taxes since you have no state income tax to deduct. Under the One Big Beautiful Bill Act passed in 2025, the combined SALT deduction cap rose to $40,000, up from $10,000. The cap increases by 1% annually through 2029 and begins phasing down for filers with modified adjusted gross income above $500,000.
The Permanent Fund Dividend: Money Coming In
Instead of collecting an income tax, Alaska pays residents a share of its oil-funded sovereign wealth each year through the Permanent Fund Dividend (PFD). The 2025 dividend was $1,000 per person; the 2024 payment was $1,702. Applications are due by March 31 each year, and late applications are denied.7Alaska Department of Revenue. Permanent Fund Dividend
Alaska does not tax the dividend, but the IRS does. You report the full amount on Schedule 1 (Form 1040), line 8g.8Internal Revenue Service. Is a Permanent Fund Dividend or a Resource Rebate Payment Received by a Resident of Alaska Taxable? That applies to children’s dividends too; check whether your child’s PFD triggers a filing requirement for them.
Eligibility runs on calendar-year residency and intent to remain in Alaska indefinitely, with limited allowable absences for things like school, military service, and medical care.9Alaska Department of Revenue. Permanent Fund Dividend – Eligibility Requirements
One Exception: Corporations
The no-income-tax rule covers individuals only. C-corporations earning income from Alaska sources pay a graduated state corporate income tax that tops out at 9.4% on taxable income above $222,000, one of the higher corporate top rates in the country.10Justia. Alaska Code 43.20.011 – Tax on Corporations Sole proprietorships and partnerships are not affected, because that income passes through to the owner’s personal return and there is no personal tax to apply.
Moving to Alaska or Working Remotely from Alaska
If you’re relocating from a state with an income tax, your former state will tax income you earned while still a resident there. Establishing Alaska residency takes more than a mailing address change. Your old state may look at your driver’s license, voter registration, where your kids attend school, and where you spend most of your nights.
Be careful not to undercut your PFD eligibility in the process. Filing a resident income tax return in another state or registering to vote elsewhere both count against you, and absences from Alaska longer than 180 days need to fit an allowable-absence category.11State of Alaska: Department of Revenue. Permanent Fund Dividend – Absence Guidelines
For remote workers, confirm your employer has your Alaska work location on file. If payroll still thinks you live in your old state, another state’s income tax may be coming out of your check that doesn’t need to. Overpaying another state because payroll wasn’t updated is one of the easiest mistakes to make, and one of the easiest to fix.