If you’re looking for a release from urban life, a deeper connection to the natural world, guaranteed adventure, and the opportunity to earn tax-free income, there’s really no better place to be than Alaska. While Alaska may have been the last state to join the nation, it’s certainly not behind on its taxpayer-friendly tax laws.
As an Alaska taxpayer, you may not have to worry about calculating your state income taxes, but there are a number of other tax considerations you’ll need to make in order to abide by Alaska’s other state tax guidelines.
Overview of Alaska State Taxes
Although there is no income tax in Alaska, you will still have to pay Alaska property taxes as well as local sales taxes as a resident of The Last Frontier. Since these taxes depend on where you live within the state and how your city or county government levies these taxes, it’s especially important to ensure you know how Alaska taxes work so that you can meet your tax liabilities and pay in accordance with local tax laws.
In this post, we’ll discuss Alaska’s friendly tax code, what it means to you as an Alaska taxpayer, and show you best practices for meeting your state tax obligations. But before we do that, let’s clear up the difference between state and federal taxes.
In Alaska, you don’t need to file state income taxes simply because there aren’t any, but that doesn’t mean that your income is totally tax-exempt. Federal income taxes are completely separate from state taxes and are collected by the United State Internal Revenue Service (IRS).
Federal taxes apply to all taxpayers in the U.S., regardless of which of the fifty states you live in. If you live in a state with income tax such as California, you’d file your state taxes and federal tax return at the same time, but since Alaska doesn’t levy income taxes, you’ll just need to make sure your federal taxes are in by the April 15th deadline.
If you want to learn more about how federal taxes will impact your tax obligations, head over to our federal income tax calculator to find out how much you’ll owe in federal income taxes and how you should file according to IRS standards.
What does “state tax” mean in Alaska?
Alaska is just about as relaxed as can be about taxes. No income tax, no state sales tax, and property taxes are only levied on a local government basis. This easygoing tax structure is what makes Alaska so appealing to retirees, property owners, and taxpayers looking to keep a few extra dollars in their paychecks.
In fact, the Alaska Department of Revenue will even pay permanent residents an annual dividend to continue living in the state. Dividend funding from the Department of Revenue comes from investment earnings from mineral revenue generated within the state. The payment amount varies year after year, but has been higher than $800 since 1988.
Although Alaskans don’t have much to worry about in the way of state taxes, the limited tax obligations and annual dividends payments may simply be a way to balance out the high cost of living in the state. In fact, the cost of living in Anchorage, Alaska is 28% higher than the national average.
Alaska State Taxes: Quick Facts
Income tax: 0%
Sales tax: 0%
Property tax: 1.04%
Annual 2019 Tax Burden ($75,000/yr income)
Total Estimated Tax Burden
Remaining Income = $74,220
Alaska Tax Brackets
Alaska does not impose income taxes on its residents, so therefore, does not have an income tax bracket system.
In states that do levy income taxes, there are different tax bracket systems that determine how much residents will owe in income taxes. The two main tax bracket systems are flat rate and progressive. Flat rate tax systems levy a single income tax on all taxpayers, while progressive tax systems increase the rates according to income level.
Self-employment taxes in Alaska
Self-employed taxpayers in Alaska do not need to pay taxes on self-employment, either. However, self-employed taxpayers will need to consider their obligations when it comes to federal self-employment taxes.
Since self-employed taxpayers don’t have tax money withheld from their paychecks like employees do, they’re responsible for paying their income and self-employment taxes on their own. The federal self-employment tax is a 15.3% tax that covers an independent contractor’s Social Security and Medicare fees that would have otherwise been paid for with tax withholdings.
Alaska does not levy any income taxes on taxpayers who make an income in the state. However, if you earn money outside of Alaska, you will need to brush up on that state’s tax laws in order to file your income taxes correctly.
As an Alaska resident, you are responsible for paying federal income taxes, too. Head over to our federal income tax calculator to help you estimate your federal tax dues and learn best practices for filing with the IRS.
Our pros make filing income tax a breeze. Give us a call!
Alaskans—consider yourselves lucky—the state of Alaska does not levy capital gains taxes like many other states do.
When it is implemented, capital gains taxes are imposed on the sale of capital assets, including:
Stocks or bonds
Alaska State Sales Tax
Alaska does not have a standard state-wide sales tax. Instead, cities and counties can designate their own local sales taxes, up to 7%. You can view the full list of city sales taxes in the Alaska Taxable report.
Alaska Excise Tax
What are excise taxes?
Excise taxes are a type of tax levied on certain products or services. These items are determined by the state government that imposes the tax. A common subset of excise taxes is known as “sin taxes.” Sin taxes are levied on items that the state government typically considers to be threatening to the health and safety of the community. Examples of excise taxes include: marijuana, alcohol, tobacco, and fuel tax.
Marijuana excise tax in Alaska
Beginning January 2019, the state of Alaska began taxing the sale and transfer of marijuana. According to the Alaska Department of Revenue, matured marijuana flower is taxed at $50 per ounce, immature bud is taxed at $25 per ounce, marijuana trim is taxed at $25 per ounce, and marijuana clones are taxes at a flat rate of $1 per clone.
Alcohol excise tax in Alaska
Alaska residents sure do get a good tax break on just about every facet of day to day life—no income taxes, no tax on sales, and no capital gains tax, either. But if you care to imbibe in the state of Alaska, you will need to pay a sin tax on any alcoholic beverages purchased in the state.
While vendors and manufacturers are responsible for remitting the alcohol tax to the Alaska Department of Revenue, the tax is generally built into the cost that consumers will pay at their point of purchase. See the tax rates on alcoholic beverages below:
Tobacco excise tax in Alaska
In addition to the tax on alcohol, Alaska also levies a 75% tax on the wholesale price of tobacco products sold in the state. This tax is to be paid by licensed wholesalers, retailers, and distributors of tobacco products sold, however, like the tax on alcoholic beverages, the cost of the tax is built into the price of the retail product.
Gas tax in Alaska
In order to fuel your vehicle and explore The Last Frontier state, you’ll need to pay a tax on motor fuel at the pump. While the tax is remitted by producers and retailers of fuel, the fee is typically built into the consumer cost. Here are the rates for tax on gasoline:
Highway fuel: $0.08 per gallon
Marine: $0.05 per gallon
Aviation Gasoline: $0.047 per gallon
Jet Fuel: $0.032 per gallon
Alaska State Property Tax
Alaska does not levy property taxes on a state level, but cities and counties within the state do have the power to impose property taxes. The median property tax in Alaska is $2,422 per year, based on a median home value of $232,900. Alaska ranks 13th in the nation for highest property taxes, collecting an average of 1.04% per year.
As we mentioned, local jurisdictions have the power to determine how much they charge for property taxes, so they vary from county to county. The highest property taxes in Alaska are levied in the Anchorage Municipality where residents pay an average of $3,563 per year, or approximately 1.32% of median home value. The Hoonah-Angoon Census Area, on the other hand, levies a much lower property tax rate—collecting an average of $678 per year or 0.37%.
Alaska does not collect inheritance or estate taxes.
But what are inheritance and estate taxes for? Inheritance and estate taxes are levied on money and assets inherited as a result of the death of a loved one. Inheritance taxes are paid by the heir after they have received their inheritance money. Estate taxes are similar, but they are paid before any money is handed off to the heirs, and after debts are settled with creditors.
If you live in Alaska, but your loved one dies in Pennsylvania where inheritance taxes are levied, you will need to abide by that Pennsylvania’s mandated regulations on the tax.
However, if you happen to sell marijuana in Nevada, there is a 10% tax on retail sale applied to the vendor. You can expect to pay 15% of its wholesale fair market value in taxes if you are planning on cultivating cannabis in the Silver State. Note that, depending on the retailer, these taxes may effectively be at least partially passed on to consumers in the form of higher retail prices for marijuana.
Alaska State Tax Credits
If you’re lucky enough to live among the Arctic foothills or the Chukchi Sea, you won’t need to worry about paying income taxes as an Alaska taxpayer, which in turn means, you will not need to claim any state tax credits.
Tax credits are a type of tax initiative that is designed to help taxpayers save money on their overall annual tax bill by reducing the amount dollar for dollar. Both state governments and the federal government offer tax credits, which means that when you file your federal tax return, you may qualify for a number of the federal tax credits that could help you save money when you file your federal tax return.
Alaska State Tax Exemptions and Deductions
Since the state of Alaska does not levy income taxes, there is not a need for state tax exemptions or deductions.
For states that do charge an income tax, many offer ways for taxpayers to save on their tax bill through exemptions and deductions. Tax exemptions are different than tax credits because they limit a taxpayer’s taxable income, but do not impact their final tax bill. This reduction in taxable income, however, may sway the taxpayer to a lower tax bracket which may decrease the amount of taxes they pay.
Remember, as an American taxpayer, you do have to file your federal income taxes even if your state does not levy income taxes. Thankfully, there are many ways to save money on your federal taxes with tax deductions and exemptions—just take a look at the most commonly overlooked deductions!
Discover more deductions — speak to a tax pro today!
Lucky you! As an Alaska resident, you do not need to pay income taxes, which means that you will not be receiving a tax refund in the mail. No need to feel defeated though, the money you saved on state income taxes will only be bolstered by your permanent dividend fund. Plus, depending on how much you’ve already paid in federal taxes, you may qualify for a federal tax refund.
How to Pay Alaska Taxes
Since the state of Alaska does not levy income taxes, you do not need to worry about paying taxes to the Alaska Department of Revenue. However, depending on which county you live in, you may need to remit property taxes to your local government.
Fallen behind on state taxes? Get help with tax resolution today!
Now that you know your responsibilities, albeit minimal responsibilities, as an Alaska taxpayer, it’s time to talk about your obligations as an American taxpayer. As you know, you’re responsible for filing a federal tax return on top of any other state tax obligations set out by your state government.
Since federal taxes apply nationwide, they’re more straightforward than navigating individual state tax codes, but that doesn’t make them any less important. In fact, filing your federal taxes correctly is critical if you want to avoid trouble with the IRS.
The good news is, our team and our trusty federal tax calculator are here to make your job as an American taxpayer easier. All you need to use our federal income tax calculator is your income and filing status, and you’re ready to estimate your annual tax dues.
Call us to stress less and save more on your federal tax refund.
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