Do Alaska residents pay taxes? Yes, but fewer than residents of almost any other state. Alaska has no state income tax and no statewide sales tax. What Alaskans do pay depends on where they live: local sales taxes in many boroughs and cities, local property taxes in a couple dozen municipalities, excise taxes on fuel, tobacco, alcohol, and marijuana, and the full slate of federal taxes that apply everywhere in the country.
No State Income Tax
Alaska does not tax personal income.1Department of Commerce, Community, and Economic Development. Office of the State Assessor – Alaska Tax Facts Wages, salaries, investment returns, retirement distributions, self-employment earnings — none of it is taxed at the state level, regardless of how much you make. No city or borough in Alaska imposes a local income tax either, so your paycheck arrives without any state or local withholding for income tax purposes.
Federal withholding still applies, and so does FICA. More on that below.
No Statewide Sales Tax, but Local Sales Taxes Apply
There is no state-level sales tax in Alaska.2Division of Community and Regional Affairs. Alaska Sales Tax Information Cities and boroughs can levy their own, though, and more than 100 do.1Department of Commerce, Community, and Economic Development. Office of the State Assessor – Alaska Tax Facts Local rates run from 1% to 7%. Anchorage charges no local sales tax at all, while smaller boroughs may sit at the top of that range. Where you shop can change the total on your receipt significantly.
Online purchases follow a similar patchwork. Alaska created the Alaska Remote Seller Sales Tax Commission after the 2018 South Dakota v. Wayfair decision, and participating municipalities collect sales tax on remote sales into their communities. Out-of-state sellers with more than $100,000 in gross Alaska sales during a calendar year must register and collect the applicable local tax for member municipalities.3Alaska Remote Seller Sales Tax Commission. Tax Rates The rate charged matches the destination community’s local rate.
Property Taxes Are Local
Alaska has no statewide property tax. Boroughs and cities levy their own, and property tax revenue funds most local schools, public safety, and infrastructure. Not every part of Alaska is taxed this way. Unincorporated areas cannot legally tax property, and some smaller organized boroughs rely on sales tax instead because their property tax base is too small.4Department of Commerce, Community, and Economic Development. Property Tax Roughly two dozen municipalities across the state actually collect one. The average effective rate on owner-occupied homes is around 0.94%, close to the national average.
Exemption for Seniors and Disabled Veterans
Every Alaska municipality that collects property tax must exempt the first $150,000 of assessed value on a primary residence for qualifying owners.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.
- Surviving spouses at least 60 years old whose deceased spouse qualified under one of the above categories.
Local governments cannot opt out of this exemption if they tax property. Some municipalities offer additional exemptions on top of the state-required minimum, so it’s worth checking with your local assessor.
Vehicle Registration Tax
Some boroughs and municipalities collect a motor vehicle registration tax that acts like a personal property tax on cars and trucks. The amount depends on the vehicle’s type, age, and weight, and it drops as a vehicle ages. In larger areas like Anchorage, Fairbanks, and Juneau, a two-year passenger vehicle registration usually runs about $145 to $152, less for older vehicles. Not every community charges this tax.
Excise Taxes
Alaska applies excise taxes to a handful of specific goods. These are built into the purchase price, so you rarely see them broken out on a receipt.
- Gasoline is taxed at 8 cents per gallon, one of 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 taxes on top.7Alaska State Legislature. Local Level Tobacco Product Taxation Rates in Alaska
- Alcohol taxes vary by category. Malt beverages are taxed at $1.07 per gallon, with higher rates on 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. Lower rates may apply to certain parts of the plant.8Justia Law. Alaska Statutes Title 43 Chapter 43.61.010 – Marijuana Tax
Federal Taxes Still Apply in Full
No state income tax does not mean no income tax. Alaska residents pay federal income tax at the same rates as residents of every other state, based on filing status and taxable income. Social Security tax (6.2% on wages up to the annual cap) and Medicare tax (1.45% on all wages, plus an extra 0.9% on earnings above $200,000 for single filers) also apply. Self-employed residents owe both the employee and employer sides of those payroll taxes.
One quirk worth knowing: because there is no state income tax to deduct, most Alaska residents get less benefit from itemizing than residents of high-tax states. The standard deduction usually wins. Homeowners can still deduct local property taxes paid, subject to the $10,000 federal cap on state and local tax deductions.
The Permanent Fund Dividend
Alaska is the only state that pays its residents an annual dividend from a sovereign wealth fund. The Alaska Permanent Fund holds a constitutionally required share of mineral lease rentals, royalties, and bonuses, and every year eligible residents receive a check drawn from the fund’s earnings. The 2025 PFD was $1,000 per person.9Alaska Department of Revenue. Permanent Fund Dividend The amount changes annually based on a five-year average of the fund’s statutory net income and the number of eligible applicants.10Alaska Department of Revenue. Permanent Fund Dividend – About Us
To qualify, you must have been an Alaska resident for the entire prior calendar year and intend to remain a resident indefinitely when you apply.11Alaska Department of Revenue. Permanent Fund Dividend – Eligibility Requirements Applications open January 1 and close March 31 each year, 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 income on your federal return. The IRS treats it like other dividend income, and you report it on line 8g of Schedule 1 (Form 1040).13Internal Revenue Service. 1099 MISC, Independent Contractors, and Self-Employed 6 The state issues the tax documentation each year, and the IRS receives its own copy, so leaving the PFD off a federal return tends to trigger a mismatch notice. It’s one of the more common filing mistakes Alaska residents make.
What About Businesses?
Individuals get a pass on state income tax, but Alaska does tax corporate income earned from Alaska sources, on a graduated schedule that tops out at 9.4%.14FindLaw. Alaska Statutes Title 43 Revenue and Taxation 43.20.011 – Tax on Corporations The corporate tax does not reach pass-through entities like sole proprietorships, partnerships, and S corporations, because their income flows to individuals who owe no state income tax on it. Anyone doing business in Alaska also needs a state business license, which costs $50 per year or $100 for two years, with discounts available for seniors and disabled veterans.15Division of Community and Regional Affairs. Renew an Alaska Business License Online
Alaska can afford its light personal tax burden largely because it taxes the industries that extract its natural resources — oil and gas production, commercial fisheries, and mining — and channels a share of that revenue into the Permanent Fund. For an individual resident, the practical picture is straightforward: no state income tax, sales and property taxes only where your local government imposes them, excise taxes baked into certain purchases, and the same federal obligations as everyone else.