Alaska has a unique tax structure compared to other U.S. states. There is no statewide sales tax or state income tax. However, residents still need to pay federal taxes and some local taxes. Understanding the tax obligations in Alaska can help residents ensure they are meeting all requirements.
Do you need to file taxes in Alaska?
Even without a state income tax, Alaskans still need to file both federal and state tax returns each year. All U.S. citizens and residents are required to file a federal income tax return. Your Alaska residency also requires you to file a state tax return.
You must file an Alaska tax return if:
- Your gross income exceeds $5,200 (as of 2022). This includes income earned both within and outside of Alaska.
- You want to receive a Permanent Fund Dividend from the state.
- You were physically in Alaska for 183 days or more.
So even if you don’t owe state taxes, you still need to file a return to fulfill the requirements as an Alaska resident.
Do you need to pay state income taxes?
Alaska is one of only a handful of states with no state income tax. You do not owe income taxes directly to the state government.
Your Alaska gross income includes:
- Wages
- Salaries
- Tips
- Taxable interest
- Dividends
- Taxable refunds and credits
- Alimony received
- Business income
- Capital gains
- IRA distributions
- Pensions and annuities
- Rental real estate income
- Royalties
- Partnership income
- S corporation income
- Farm income
- Unemployment compensation
- Taxable Social Security benefits
- Other taxable income
But you do not pay taxes directly to Alaska on any of this income. Your only state income tax obligation is to file a tax return each year.
Do you need to pay federal income taxes?
Yes, Alaska residents are still responsible for paying federal income taxes. This is required of all U.S. citizens and residents, regardless of which state they live in.
Federal income tax rates range from 10% to 37%, depending on your taxable income and filing status. Alaska does not offer any special deductions or exemptions from federal taxes.
Common federal taxes
Federal taxes you may need to pay include:
- Federal income tax – Based on your taxable income and filing status
- Self-employment tax – 15.3% tax for those who are self-employed
- Capital gains tax – 0%, 15% or 20% depending on income and held duration
Any income you earn, including from Alaska sources, is subject to these federal income taxes. The rates do not change because you live in Alaska.
Are Alaska residents charged sales tax?
There is no statewide sales tax in Alaska. But some local municipalities impose their own sales taxes. Residents pay sales tax based on where they make retail purchases.
Cities and boroughs with sales tax
| City or Borough | Sales Tax Rate |
|---|---|
| Anchorage | 8.5% |
| Bethel | 6% |
| Fairbanks | 3% |
| Juneau | 5% |
| Ketchikan | 6% |
| Kodiak Island Borough | 6% |
| Matanuska-Susitna Borough | 3% |
| Sitka | 6% |
| Skagway | 5% |
| Wrangell | 6% |
Purchases made outside of these jurisdictions are sales tax free. But within these cities or boroughs, sales tax will be charged on eligible goods and services.
Is there property tax in Alaska?
Alaska also allows local governments to impose property taxes. There is no statewide property tax.
Cities, boroughs, and districts may charge property tax on:
- Land
- Buildings
- Permanent structures
- Natural resources
Property tax rates vary widely across the state but are generally around 1% of assessed value. Local assessors determine the taxable value of your property.
Some municipalities also allow exemptions or deferrals for senior citizens, disabled veterans, and long-time residents. Check with your local property tax assessor’s office for details on rates and programs in your area.
Does Alaska tax groceries?
Most grocery items are exempt from the sales taxes imposed by local governments in Alaska. This includes ingredients and foodstuffs for meals prepared at home.
Examples of exempt grocery items include:
- Meat, poultry, and fish
- Bread and baked goods
- Cereals and grains
- Dairy products
- Fruit and vegetables
- Candy and gum
The exemption aims to keep groceries affordable for Alaska residents. But some prepared foods or meals purchased at a grocery store may still be taxable.
Taxable grocery purchases
Some items commonly purchased at a grocery store are still subject to local sales taxes in Alaska:
- Prepared meals or food intended for immediate consumption
- Dietary supplements
- Liquor
- Tobacco products
Check with your local tax authority to determine which grocery items are taxable in your area. Exemptions may vary between jurisdictions.
Does Alaska have gas taxes?
Alaska levies the following taxes on vehicle fuel:
- Federal gas tax – 18.4 cents per gallon
- State fuel tax – 16.5 cents per gallon
- Environmental surcharge – 1 cent per gallon
This adds up to a total gas tax of about 35.9 cents per gallon across the state. The revenue goes to support highway maintenance, construction, and other transportation projects in Alaska.
Some local governments also charge an additional gasoline tax ranging from 1 to 7 cents per gallon.
Diesel and aviation fuel are taxed at slightly higher rates. Taxes on fuel also help fund environmental remediation of spill sites in Alaska.
Does Alaska have inheritance or estate taxes?
Alaska does not impose any form of state inheritance tax or estate tax. There is no tax liability solely for inheriting money or property located within Alaska.
But inherited assets may still be subject to federal estate taxes. For 2023, federal estate taxes apply to inherited estates valued over $12.92 million. Alaska does not levy any additional estate taxes at the state level.
Does Alaska tax Social Security benefits?
Alaska does not tax Social Security benefits at the state level. Retirees can collect their full Social Security payments tax-free.
However, your Social Security benefits may still be partially taxed by the federal government. If your provisional income exceeds certain thresholds, you may owe federal income taxes on 50% or 85% of your benefits.
Provisional income includes:
- Your adjusted gross income
- Nontaxable interest
- Half your Social Security benefits
If your provisional income is between $25,000-$34,000 (single) or $32,000-$44,000 (married filing jointly), you may be taxed on up to 50% of benefits. Above those amounts, up to 85% of benefits may be taxed.
Does Alaska have other taxes?
Alaska levies selective taxes on specific goods and activities, including:
- Marijuana taxes – Cultivators pay $50 per ounce in excise tax. Retail sales face additional local taxes up to 12%.
- Alcohol taxes – $2.50 per gallon on beer, $12.80 per gallon on wine, and variable rates on distilled spirits.
- Tobacco taxes – $2 per pack of cigarettes and variable rates on other tobacco products.
- Fuel transfer fees – $0.95 per barrel of refined fuel transferred in-state.
- Mining license tax – Based on net income, starting at 3% up to 7%.
- Commercial passenger vessel tax – $46 per passenger visiting Alaska.
- Vehicle rental tax – 10% tax on car and RV rentals.
- Gambling/gaming taxes – Variable tax rates on proceeds for pull-tabs, lotteries, and charitable events.
- Tire fee – $2.50 tax on new tire purchases.
The state levies these taxes to generate revenue while discouraging consumption on items like alcohol, tobacco, gambling, etc.
Conclusion
While Alaska does not have a state income or statewide sales tax, residents still have some tax obligations. You must pay federal income taxes. Buying goods in cities with sales tax means paying local rates. And inherited property may be liable for federal estate taxes.
To meet your Alaska and federal tax requirements, be sure to file returns annually. Keep detailed records to calculate deductions, exemptions, and any taxes owed. Consider working with a tax professional to ensure you take advantage of all available credits and subsidies as an Alaska resident.