There is no income tax in Alaska. The state repealed its personal income tax in 1980, made the repeal retroactive to January 1, 1979, and has not brought it back. Wages, interest, dividends, retirement distributions, and self-employment earnings are all untaxed at the state level, whether you live in Alaska full-time, part-time, or simply earn money there. You file no state return and have no state withholding on your paycheck. Alaska does collect other taxes, though, and a few of them catch newcomers by surprise.
Why Alaska Has No Income Tax
The Trans-Alaska Pipeline changed the state’s finances in the 1970s. Oil lease payments, royalties, and production taxes filled the general fund to the point that the legislature decided individual earnings no longer needed to be taxed. The repeal has held for more than four decades, and there is no serious legislative effort to reinstate the tax.
Oil and gas revenue still funds a large share of the state budget, supplemented by federal money and investment earnings from the Alaska Permanent Fund. That structure is what keeps Alaska among the few states with neither a personal income tax nor a statewide sales tax. The budget rises and falls with energy prices, but that volatility has not translated into new taxes on residents.
The Permanent Fund Dividend
Instead of collecting income tax, Alaska pays its residents. Every fall, eligible Alaskans receive a check from the Permanent Fund Dividend program, funded by investment earnings on the state’s oil wealth. The 2025 dividend was $1,000 per person. The 2024 payment was $1,702. The amount changes each year based on fund performance and legislative decisions about how much to distribute.
To qualify, you must have been an Alaska resident for the full prior calendar year, intend to remain in the state indefinitely, and have stayed within the program’s absence limits. The general absence limit is 180 days during the qualifying year, with narrow exceptions such as settling a deceased family member’s estate, which allows up to 220 days away. Certain felony and misdemeanor convictions during the qualifying year disqualify you.
The Dividend Is Federally Taxable
Alaska will not tax your dividend, but the IRS will. The full PFD payment counts as income on your federal return and gets reported on Schedule 1 (Form 1040), line 8g.1Internal Revenue Service. Clarification About Alaska Permanent Fund Dividends If the name and Social Security number on your application do not match Social Security Administration records, the state withholds 24% and sends it to the IRS; you claim that amount as taxes already paid when you file.2Department of Revenue. Permanent Fund Dividend – FAQ Skipping the dividend on your federal return invites penalties and interest, because the IRS knows exactly what you received.
Local Sales Taxes
There is no statewide sales tax, but that does not mean you will not pay sales tax at the register. Boroughs and cities set their own rates. Local sales tax across Alaska ranges from zero in some communities to as high as 7.85%, with a population-weighted average around 1.82%. Some areas apply the tax year-round; others turn it on only during tourist season to shift the burden onto out-of-state visitors.
Online purchases can be taxed too. More than 60 Alaska municipalities have joined the Alaska Remote Seller Sales Tax Commission, which requires out-of-state retailers and marketplace platforms to collect local sales tax on deliveries into member communities.3ARSSTC. Member Jurisdictions A remote seller must collect if its Alaska sales exceeded $100,000 or reached 200 or more transactions in the prior calendar year. The rate matches the community where the product is delivered.
Deducting Local Sales Tax Federally
Because there is no state income tax to deduct, Alaska residents who itemize on their federal return can elect to deduct local sales taxes on Schedule A instead. The IRS lets you pick between deducting state and local income taxes or state and local sales taxes, but not both.4Internal Revenue Service. Instructions for Schedule A (Form 1040) For Alaskans, sales tax is the only option that produces a deduction. The IRS also requires Alaska residents to use the Ratio Method to calculate the local sales tax deduction rather than the standard optional tables.
Property Taxes
Property tax is where local governments in Alaska do their heavy lifting. Boroughs and cities rely on it to fund schools, road maintenance, emergency services, and infrastructure. Rates vary significantly by jurisdiction, and there is no statewide cap or uniform rate.
Two exemptions matter to a lot of residents. If you are 65 or older and own the home you live in as your primary residence, state law requires every municipality to exempt the first $150,000 of assessed value from property tax. The same exemption applies to surviving spouses aged 60 or older of someone who qualified. Municipalities can go further for hardship cases, but the $150,000 floor is a statewide guarantee.
Veterans with a service-connected disability rated at 50% or higher by the VA or their military branch may qualify for a property tax exemption on their primary residence.5State of Alaska. Taxes and Land – Veterans The exemption amount, application process, and eligibility rules are set by the local municipality, so what you get depends on where you live. If the veteran dies, the exemption may transfer to a surviving spouse who is at least 60. Check with your borough or city assessor for the specific rules.
What About Businesses
Individuals pay no state income tax, but C-corporations operating in Alaska do. The corporate tax is graduated across ten brackets, starting at 0% on the first $25,000 of taxable income and topping out at 9.4% on income above $222,000.6Justia. Alaska Code 43-20-011 – Tax on Corporations
Pass-through entities are treated differently. S-corporations, partnerships, and sole proprietorships flow their income to the individual owners, who owe no state income tax on it. That gap makes Alaska attractive for small business owners compared to states that tax both the entity and the owner.
Fuel, Marijuana, and Other Excise Taxes
Alaska imposes excise taxes on specific products. The state motor fuel tax on gasoline is $0.08 per gallon, with a small surcharge bringing the effective rate to roughly $0.09 per gallon. That is the lowest gas tax in the country; most states charge between $0.20 and $0.60. Marine fuel is taxed at $0.05 per gallon.
The state also charges a $50-per-ounce excise tax on marijuana transferred from a cultivation facility to a retail store or manufacturing facility.7Justia. Alaska Code 43-61-010 – Marijuana Tax The tax applies proportionally to partial ounces and covers the plant material itself, excluding stalks, sterilized seeds, and other non-psychoactive components. The state may set a lower rate for certain parts of the plant.
Residency and the Risk From Other States
Living in a state with no income tax only helps if no other state claims you as its resident. Alaska has no residency rules to worry about internally, since it has nothing to collect. The risk runs in the other direction: if you split time between Alaska and a state that does tax income, that state may try to tax your earnings worldwide.
For PFD purposes, residency requires more than physical presence. You need to show intent to remain in Alaska indefinitely through customary ties: an Alaska driver’s license, voter registration, and a primary home in the state.8Cornell Law School. Alaska Code 15 AAC 23.143 – Establishing and Maintaining Alaska Residency The regulation says outright that being in Alaska is not enough without those ties.
If you spend meaningful time in another state, document your Alaska connections. A home you own and occupy, local bank accounts, vehicle registrations, and memberships in Alaska organizations all support your position. States with income taxes have grown more aggressive about claiming part-year or dual residents, and Alaska will not fight that battle for you because it has no stake in where you file. Proving another state should not tax your income falls entirely on you.