Overview
Alaska is one of nine states that does not levy a state income tax on wages, salaries, or investment income. For workers earning a typical salary, this means your state withholding line will always read zero. Your Alaska paycheck only faces federal income tax and FICA deductions (Social Security at 6.2% and Medicare at 1.45%).
One financial benefit unique to Alaska is the Permanent Fund Dividend (PFD). Every year, eligible residents receive a share of the state's oil wealth through the Alaska Permanent Fund. In recent years the PFD has ranged from roughly $1,100 to $3,200 per person. This dividend is taxable at the federal level but not at the state level, since Alaska has no income tax. Families with multiple eligible members can receive a meaningful boost to annual household income.
Alaska Tax Characteristics
Alaska has no state income tax
Your entire salary is exempt from state income tax withholding. Only federal income tax and FICA (Social Security and Medicare) are deducted from your paycheck.
| Tax Type | Rate |
|---|---|
| Average Property Tax Rate | 1.04% |
| Average Combined Sales Tax Rate | 1.76% |
| Cost of Living Index | 125.1 (US avg = 100) |
Understanding Alaska Taxes
While you avoid state income tax, Alaska residents should plan for a higher cost of living compared to the national average. The cost-of-living index is approximately 125, meaning goods and services cost about 25% more than the U.S. average. Groceries, utilities, and housing in particular tend to be significantly more expensive, especially in remote areas outside Anchorage or Fairbanks.
Alaska does not have a statewide sales tax, but many local jurisdictions impose their own sales taxes. The average combined local sales tax rate is about 1.76%, though some boroughs charge nothing while others approach 7%. This patchwork of local taxes means your actual sales tax burden depends heavily on where you live and shop.
Property taxes in Alaska average about 1.04% of assessed home value, close to the national average. However, certain boroughs and municipalities offer senior citizen and disabled veteran property tax exemptions that can substantially reduce or eliminate property tax bills. Anchorage, for example, offers a senior exemption on the first $150,000 of assessed value.
Because Alaska generates revenue primarily from oil royalties and severance taxes rather than income or statewide sales taxes, residents enjoy a relatively low overall tax burden. However, budget fluctuations tied to oil prices can affect state services. Financial planners recommend that Alaska residents maintain larger emergency funds to account for the higher cost of living and potential service disruptions in remote areas.
Filing Tips for Alaska
File for your PFD every year — it is free money but requires an annual application by March 31
Check whether your borough offers a senior or veteran property tax exemption to reduce housing costs
Budget for higher grocery and utility costs, especially if you live outside Anchorage or Fairbanks
State Revenue Authority
For the most current tax information, visit the official Alaska tax authority:
tax.alaska.govRelated Calculators
Frequently Asked Questions
For educational purposes only -- not financial or tax advice. Tax rates shown are based on 2026 data and may not reflect recent changes. Consult a tax professional for your specific situation.