Yes, people in Alaska do pay taxes, just not the ones most Americans think of first. Alaska has no state income tax and no statewide sales tax, which makes it one of the lightest-taxed states for individuals.1Department of Commerce, Community, and Economic Development. Office of the State Assessor – Alaska Tax Facts You still owe federal income tax, Social Security, and Medicare, and depending on where you live in the state you will likely pay local sales tax, property tax, a vehicle registration tax, and excise taxes built into the price of fuel, alcohol, tobacco, and marijuana.
What Alaska Doesn’t Tax
There is no state tax on personal income in Alaska. Wages, salaries, investment returns, and retirement distributions all go untaxed at the state level, and no city or borough collects a local income tax either.1Department of Commerce, Community, and Economic Development. Office of the State Assessor – Alaska Tax Facts There is also no statewide sales tax.2Division of Community and Regional Affairs. Alaska Sales Tax Information That part is where the picture gets more complicated, because the state constitution lets cities and boroughs set their own.
Local Sales Tax
More than 100 Alaska municipalities charge a local sales tax, with rates running from 1% to 7%.1Department of Commerce, Community, and Economic Development. Office of the State Assessor – Alaska Tax Facts Where you shop matters. Anchorage, for example, has no local sales tax, so a purchase there costs less than the same purchase in a borough that charges 6% or 7%.
Online purchases from out-of-state sellers can also carry local tax. Alaska set up the Alaska Remote Seller Sales Tax Commission, and participating municipalities collect their local rate from remote sellers who exceed $100,000 in gross sales into Alaska in a calendar year.3Alaska Remote Seller Sales Tax Commission. Tax Rates The rate on your order matches whatever your delivery destination charges locally.
Property Tax
Alaska has no statewide property tax, and only about two dozen municipalities levy one. Unincorporated areas have no legal authority to tax property, and some smaller boroughs rely on sales tax instead because their property tax base is too thin.4Department of Commerce, Community, and Economic Development. Property Tax For owner-occupied homes, the average effective rate works out to around 0.94%, roughly in line with the national average.
Where property tax does apply, it is the main revenue source for schools, public safety, and local infrastructure.
Senior and Disabled Veteran Exemption
Every Alaska municipality that collects property tax must exempt the first $150,000 of assessed value on a primary residence owned and occupied by a qualifying applicant.5Justia Law. Alaska Statutes Title 29 Chapter 29.45.030 – Required Exemptions Three groups qualify:
- Residents age 65 or older.
- Veterans with a service-connected disability rated at 50% or more.
- Widows or widowers at least 60 years old whose deceased spouse qualified under one of the categories above.
Local governments cannot opt out. If a borough taxes property, it has to honor this exemption when a qualifying homeowner applies, and some municipalities add further exemptions on top of it.
Vehicle Registration Tax
Some boroughs and cities charge a motor vehicle registration tax that works like a personal property tax on your vehicle. The amount depends on the vehicle’s type, age, and weight, and it drops as the vehicle gets older. In larger communities like Anchorage, Fairbanks, and Juneau, two-year registration for a passenger vehicle typically runs about $145 to $152, with older vehicles paying less. Not every area of the state charges it.
Excise Taxes
Alaska collects excise taxes on several categories of goods. These are built into the retail price, so you rarely see them as a separate line.
- Gasoline is taxed at 8 cents per gallon, among the lowest state fuel taxes in the country.6The Book of the States. State Motor Fuel Tax Rates
- Cigarettes carry a state tax of $2.00 per pack of 20, and some local governments add their own tobacco tax on top of that.7Alaska State Legislature. Local Level Tobacco Product Taxation Rates in Alaska
- Alcohol rates vary by type. Malt beverages are taxed at $1.07 per gallon, with higher rates for wine and distilled spirits. Alaska’s alcohol taxes are among the highest in the nation.
- Marijuana is taxed at $50 per ounce when a cultivation facility sells or transfers it to a retail store or product manufacturer, and the state can set lower rates for certain parts of the plant.8Justia Law. Alaska Statutes Title 43 Chapter 43.61.010 – Marijuana Tax
Federal Taxes Still Apply
No state income tax does not mean no income tax. Alaska residents pay federal income tax at the same rates as everyone else, based on taxable income and filing status. Social Security tax (6.2% on wages up to the annual cap) and Medicare tax (1.45% on all wages, plus an additional 0.9% on earnings above $200,000 for single filers) apply in full. Self-employed residents owe both the employee and employer shares of those payroll taxes.
One side effect of having no state income tax: there is no state income tax amount to deduct on your federal return. For most Alaskans, the standard deduction ends up being the better choice. Homeowners can still deduct local property tax paid, subject to the $10,000 cap on state and local tax deductions.
The Permanent Fund Dividend
Alaska pays residents each year rather than taxing them. The Permanent Fund Dividend comes from investment earnings on the Alaska Permanent Fund, which under the state constitution holds at least 25% of all mineral lease rentals, royalties, and bonuses the state collects.
The 2025 PFD was $1,000 per person.9Alaska Department of Revenue. Permanent Fund Dividend The amount changes each year, calculated from half of the fund’s statutory net income averaged over the five most recent fiscal years, then divided among eligible applicants.10Alaska Department of Revenue. Permanent Fund Dividend – About Us To qualify, you must have been an Alaska resident for the entire calendar year before you apply and intend to remain a resident indefinitely at the time of application.11Alaska Department of Revenue. Permanent Fund Dividend – Eligibility Requirements Applications are open January 1 through March 31, and you have to reapply every year.12State of Alaska: Department of Revenue. Permanent Fund Dividend – FAQ
The PFD Is Federally Taxable
The dividend is taxable on your federal return. The IRS treats it like other dividend income, reported on line 8g of Schedule 1 (Form 1040), and Alaska issues the appropriate tax documentation each year.13Internal Revenue Service. 1099 MISC, Independent Contractors, and Self-Employed 6 The IRS gets a copy of the payment data, so a missing PFD on your return will be flagged.
How Alaska Pays for Itself Without Income Tax
The reason individuals carry so little state tax burden is that corporations and resource industries carry more. Alaska imposes a corporate income tax with ten marginal brackets, starting at 0% on the first $25,000 of Alaska-source income and climbing to 9.4% on income above $222,000.14FindLaw. Alaska Statutes Title 43 Revenue and Taxation 43.20.011 – Tax on Corporations Pass-through entities (sole proprietorships, partnerships, S corporations) are not subject to this tax, because their income flows to individuals who owe no state income tax. Anyone conducting business in Alaska also needs a state business license, which costs $50 per year or $100 for two years, with discounts for seniors and disabled veterans.15Division of Community and Regional Affairs. Renew an Alaska Business License Online
Resource industries pay more still. Oil producers pay a 35% production tax on the production tax value of taxable oil; gas producers pay 13% of gross value at the point of production.16Justia Law. Alaska Statutes Title 43 Chapter 43.55.011 – Oil and Gas Production Tax Fish processors pay a fisheries business tax, with shore-based operations at 3% on most species and 4.5% on canned salmon, and floating processors at 5%.17Justia Law. Alaska Statutes Title 43 Chapter 43.75.015 – Fisheries Business Tax Mining operations pay a license tax of 3% to 7% on net income above $40,000, after a three-and-a-half-year exemption for new operations.18Justia Law. Alaska Statutes Title 43 Chapter 43.65.010 – Mining License Tax Oil and gas revenue in particular has long been the backbone of the state budget and the main reason Alaska can afford to leave individual income alone.