Alaska does not have a state income tax

Alaska is one of nine states with no income tax on wages, salaries, or other personal earnings. You will not owe Alaska state income tax on money you earn, no matter how much you make or how long you live there. This applies to residents and non-residents who work in Alaska.

However, you still owe federal income tax to the IRS. Alaska's lack of state income tax does not change your federal filing requirements or what you send to Washington, D.C. You file your federal return the same way as someone in any other state.

Alaska also does not tax capital gains, dividends, or interest income at the state level. If you sell stock, receive investment returns, or earn money from savings accounts, Alaska will not tax that either.

Key Takeaways

  • Alaska residents and workers pay no state income tax on wages, salaries, investment income, or capital gains.
  • Federal income tax is still required — Alaska's lack of state tax does not reduce what you owe the IRS.
  • Alaska funds state services through oil revenue, sales tax, and property taxes rather than income tax.
  • If you move to Alaska from another state, you do not owe back income tax to your former state for the year you leave, as long as you establish residency before December 31.

How Alaska pays for state services without income tax

Alaska relies on oil revenue from the North Slope to fund much of its state government. The state owns mineral rights and collects royalties when oil companies extract and sell crude oil. This revenue stream has historically been large enough to cover education, roads, public safety, and other services that other states fund through income tax.

Alaska also collects a sales tax, though the rate varies by municipality. Most areas charge between 0 and 7.5 percent sales tax. Some cities and boroughs add local sales taxes on top of the state rate. Property taxes are set by local governments and vary widely depending on where you live.

The state also funds the Permanent Fund Dividend, an annual payment to residents from oil wealth. This is not income tax; it is a distribution of state investment earnings. The amount changes each year based on fund performance.

What you still owe the IRS

Federal income tax applies in Alaska just as it does everywhere else. You must file a federal return with the IRS if your income exceeds the threshold for your filing status. For 2024, a single person with more than $14,600 in income must file; a married couple filing jointly must file if they earn more than $29,200.

Self-employed people in Alaska owe federal self-employment tax on net earnings above $400, regardless of whether they also owe income tax. This covers Social Security and Medicare contributions.

If you work for an employer in Alaska, your paycheck will have federal income tax withheld. You will also see Social Security and Medicare taxes taken out. Alaska does not withhold state income tax because there is no state income tax to withhold.

Moving to Alaska and your tax residency

If you move to Alaska during the year, you may owe income tax to your former state for the months you lived there, depending on that state's rules. However, you will not owe Alaska state income tax for any part of the year, even if you arrived on January 1.

To establish Alaska residency for tax purposes, you generally need to move your permanent home to the state and intend to stay. This usually means getting an Alaska driver's license, registering your vehicle in Alaska, and establishing a physical address. The IRS looks at where you spend the most time and where your family lives.

If you worked in Alaska but lived in another state, you may still owe income tax to that other state. Alaska's lack of income tax does not shield you from your home state's tax obligations.

Self-employed workers and business owners in Alaska

If you own a business or work as a contractor in Alaska, you do not owe Alaska state income tax on your business earnings. However, you still owe federal self-employment tax and federal income tax on your net profit.

Alaska does not have a state corporate income tax either. Corporations registered in Alaska do not pay state income tax on their profits. This is one reason some businesses choose to incorporate in Alaska, though they may still owe federal corporate tax and taxes in states where they do business.

You will need to file a federal Schedule C (if you are self-employed) or a corporate return with the IRS. Keep records of income and expenses the same way you would in any other state.

Other Alaska taxes you may encounter

While Alaska has no income tax, you may owe other taxes depending on your situation. Sales tax applies to most purchases in Alaska, though the rate depends on your location. Some items like groceries are exempt in some municipalities.

Property tax is assessed by local governments and varies significantly. A home in Anchorage may have a different tax rate than the same home in Juneau or a rural area. Check with your local assessor's office for the rate in your area.

If you own rental property in Alaska, you owe federal income tax on rental income. Alaska does not tax it at the state level, but the IRS does. You can deduct mortgage interest, property taxes, repairs, and other business expenses.

Frequently Asked Questions

Do I have to file a federal tax return if I live in Alaska?

Yes, if your income exceeds the filing threshold for your status. Alaska's lack of state income tax does not change federal requirements. A single person earning over $14,600 in 2024 must file with the IRS, regardless of where they live.

Can I claim Alaska as my home state for tax purposes if I just moved there?

You can claim residency if you move your permanent home to Alaska and intend to stay. This usually requires getting an Alaska driver's license and registering your vehicle there. Your former state may still tax you for the months you lived there before moving.

Does Alaska tax retirement income or Social Security?

No. Alaska does not tax Social Security benefits, pensions, 401(k) withdrawals, or IRA distributions at the state level. You still owe federal tax on these sources if they push you over the federal filing threshold.

What if I work remotely for a company outside Alaska but live in Alaska?

You do not owe Alaska state income tax on your wages, even if your employer is in another state. However, you may owe income tax to the state where your employer is located, depending on that state's rules. Check with your employer's state for their remote worker tax policy.

Is the Permanent Fund Dividend considered income for tax purposes?

The Permanent Fund Dividend is not taxable at the state level in Alaska. However, it may be taxable at the federal level depending on your total income and filing status. The IRS treats it as income for determining whether you must file a federal return.