Alaska is uniquely tax-friendly: it has no state income tax and no state sales tax - one of only a handful of states with neither. Alaska funds state government primarily through oil production taxes and federal revenue sharing. A defining feature of Alaska is the Alaska Permanent Fund Dividend (PFD) - an annual cash payment to eligible residents funded by oil revenue investment returns.
State Income Tax
None (0%)
State Sales Tax
None (0% state)
Permanent Fund Dividend
Annual payment to residents
Alaska Has No State Income Tax
Alaska is one of nine states with no individual income tax. All wages, salaries, tips, overtime, bonuses, investment income, and retirement distributions are free from Alaska state income tax. Unlike most no-income-tax states that substitute high sales taxes, Alaska also levies no state sales tax. Alaska funds state operations primarily through oil production taxes, investment returns on the Alaska Permanent Fund, and federal revenue. When oil revenue is sufficient, Alaska has historically needed no broad-based tax - a situation unique among U.S. states.
Alaska Permanent Fund Dividend (PFD)
The Alaska Permanent Fund Dividend is an annual payment made to eligible Alaska residents from the investment returns of the Alaska Permanent Fund. The fund was established in 1976 and has grown to become one of the world's largest sovereign wealth funds, holding over $70 billion in diversified assets. Eligible residents who lived in Alaska the entire prior calendar year and intend to remain receive an annual dividend. The PFD amount is set by the Legislature each year based on fund performance. The PFD is taxable at the federal level as ordinary income, but Alaska imposes no state income tax on it or any other income.
OBBBA Tips and Overtime in Alaska
The One Big Beautiful Bill Act (OBBBA) introduced federal deductions for qualified tip income, overtime pay, and senior income starting in tax year 2025. Since Alaska has no state income tax, these deductions apply only to your federal tax liability - Alaska workers already pay $0 in state income tax. Alaska's large fishing, tourism, and hospitality industries employ many workers who earn tip income, who will benefit from the federal OBBBA tip deduction.
No. Alaska has no state individual income tax and is one of only two states with neither a state income tax nor a state sales tax (the other being Montana, which has no sales tax but does have an income tax). Alaska funds state government primarily through oil production taxes and federal revenue sharing. Residents pay $0 in Alaska state income tax on wages, salaries, investment income, or any other income type.
Does Alaska have a state sales tax?
No. Alaska has no state-level sales tax. However, local jurisdictions - boroughs and cities - may levy their own local sales taxes of up to approximately 7.5%. The statewide average local rate is pending verification. Consumers in Anchorage pay no sales tax (the municipality does not impose one), while consumers in Juneau and other communities pay local rates that vary by jurisdiction.
What is the Alaska Permanent Fund Dividend (PFD)?
The Alaska Permanent Fund Dividend (PFD) is an annual payment made by the State of Alaska to eligible residents from the investment returns of the Alaska Permanent Fund - a sovereign wealth fund built from oil revenue. To qualify, residents must have lived in Alaska for the entire prior calendar year and intend to remain. The PFD amount varies annually based on fund performance and is set by the Legislature. The PFD is taxable at the federal level but is not subject to any Alaska state income tax (since Alaska has none). The PFD is unique in the United States - no other state distributes oil revenue directly to residents this way.
Does Alaska tax retirement income?
No. Alaska has no state income tax, so all retirement income - including Social Security benefits, pensions, 401(k) distributions, 403(b) distributions, and IRA withdrawals - is entirely exempt from Alaska state taxation. Additionally, eligible retirees who are Alaska residents may continue to receive the annual Permanent Fund Dividend if they meet residency requirements.
Does the OBBBA tips and overtime deduction apply in Alaska?
The One Big Beautiful Bill Act (OBBBA) introduced federal deductions for qualified tip income, overtime pay, and senior income starting in tax year 2025. Since Alaska has no state income tax, these deductions affect only your federal tax. Alaska workers with qualifying tips or overtime pay benefit from the federal deduction but already pay $0 in Alaska state income tax regardless.
What are Alaska's property taxes?
Alaska property tax rates are set by local municipalities and boroughs, not the state. Rates vary significantly by community. The average effective rate is pending verification - consult your local borough assessor for current rates.
Does Alaska tax capital gains?
No. Alaska has no state income tax. Capital gains - both short-term and long-term - are not subject to any Alaska state tax. Only federal capital gains tax applies to Alaska residents.
We use cookies for analytics (Google Analytics 4) and advertising (Google AdSense). Your calculator inputs never leave your browser.Learn more
