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Alaska Taxes: What You Need to Know

Alaska is one of seven states with no personal income tax. The state income tax rate on individuals is 0%, meaning employers do not withhold any state income tax from employee wages. There is no Alaska equivalent of a W-4, no state tax tables to maintain, and no state tax reconciliation at year-end. Federal Form W-4 is the only withholding certificate employees need to complete.

Income sources including wages, salaries, bonuses, retirement distributions, Social Security benefits, investment earnings, and military pay — are not taxed at the Alaska state level. No Alaska individual income tax return exists; all filing obligations are exclusively federal.

Because Alaska has no personal income tax, the only deductions from an employee paycheck are federal income tax, Social Security, Medicare, and the Alaska UI employee contribution (until the $54,200 wage base is met).

Here’s a detailed breakdown of the various tax withholdings and deductions in Alaska, followed by a summary table:

Federal, State, and Local Tax Withholding

• Federal Tax Withholding: Employers withhold federal income tax based on the employee’s W-4 form, which includes information about filing status and number of dependents. The federal tax rates range from 10% to 37%.
• State Tax Withholding: Alaska imposes no state personal income tax. The state income tax rate is 0%. No state withholding, state tax tables, or year-end reconciliation is required.
• Local Tax Withholding: Alaska levies no statewide sales tax and no statewide property tax. Both are administered exclusively at the local level. Cities, boroughs, and municipalities may impose their own sales taxes, ranging from 0% to approximately 7.85% depending on jurisdiction. The average combined state and local sales tax rate across Alaska is 1.82%.

FICA & State Insurance Taxes

1. FICA Taxes: These include Social Security and Medicare taxes. The Social Security tax rate is 6.2% on earnings up to $160,200, and the Medicare tax rate is 1.45% on all earnings. An additional 0.9% Medicare tax applies to earnings over $200,000 for single filers.
2. Alaska Unemployment Insurance (UI) Tax: Both employers and employees contribute to UI. The employee contribution rate is 0.50% on wages up to the $54,200 taxable wage base (2026). The maximum annual employee UI contribution is $271. Employer rates range from 1.00% (rate classes 1–20) to 5.40% (rate class 21), based on layoff history.

Pre-Tax Deductions

• Medical Insurance: Premiums for health insurance plans are often deducted from an employee’s paycheck before taxes are applied, reducing taxable income.
• 401(k) Contributions: Contributions to a 401(k) retirement plan are pre-tax, meaning they are deducted from gross income before taxes are calculated (up to $23,000 annually).
• Other pre-tax deductions include contributions to Health Savings Accounts (HSAs), Flexible Spending Accounts (FSAs), and transportation benefits.

Source: Alaska Department of Revenue — Tax Division: tax.alaska.gov

Tax Percentage Table

Alaska Minimum Wage as of 2026

Following the passage of Ballot Measure 1 in November 2024, Alaska’s minimum wage follows a legislatively scheduled path of increases through 2027, after which annual CPI adjustments apply.

Key wage rules:

• No tip credit: Alaska prohibits tip credits. All employees — including tipped workers — must receive the full state minimum wage as base pay.
• Overtime: Alaska law prohibits employing an employee for more than 40 hours per week or more than 8 hours in a single day without paying overtime at 1.5× the regular rate (AS 23.10.060).
• Exempt salary threshold: Effective July 1, 2026: $1,120/week ($28.00/hr equivalent — twice the $14.00 minimum wage for the first 40 hours worked per week).

Source: labor.alaska.gov — Press Release No. 25-11 (June 11, 2025)

Source: Summary of Alaska Wage and Hour Act (AS 23.10.050–23.10.150)

Alaska Unemployment Insurance (UI) Tax — 2026

Alaska’s unemployment insurance program is administered by the Department of Labor and Workforce Development. Contributions are required from both employers and employees on wages up to the annual taxable wage base.

Alaska uses 21 rate classes. Experienced employers are assigned a rate class based on their Average Quarterly Decline Quotient, which reflects their layoff history relative to total payroll. New employers without four qualifying quarters of wage history are assigned the applicable industry rate.

Source: labor.alaska.gov/estax/2026-experience-rates.html — 2026 UI Tax Rates for Experienced Employers

Source: labor.alaska.gov/estax — Employment Security Tax

Alaska Permanent Fund Dividend (PFD)

The Alaska Permanent Fund Dividend is an annual payment distributed to eligible Alaska residents from investment earnings on oil and mineral royalties. It is paid by the Alaska Department of Revenue, Permanent Fund Dividend Division. It is not an employer benefit and does not affect payroll withholding.

PFD Amounts — Recent Years

Federal tax treatment

The PFD is taxable for federal income tax purposes. It is not subject to Alaska state income tax (Alaska has no personal income tax). The State of Alaska’s Federal Tax Identification Number for PFD reporting is 92-6001185. If a recipient’s name or SSN does not match IRS records, the PFD is subject to 24% IRS backup withholding, deducted before any other deductions.

2026 PFD Payment Schedule

Garnishments and voluntary deductions:

• Government agencies and courts may attach 100% of a PFD; civil judgments are limited to 80%. A $2.00 administrative fee applies per involuntary garnishment.
• Recipients may direct up to 50% of their PFD to an Alaska 529 education savings plan and may make charitable contributions through the Pick.Click.Give program.
• Applicants convicted of or incarcerated due to a felony during the qualifying year are ineligible.

Source: pfd.alaska.gov — 2025 Permanent Fund Dividend amount

Source: pfd.alaska.gov/payments/tax-information — Tax Information for PFD recipients

Workers’ Compensation — 2026 Key Figures

The Alaska Workers’ Compensation Act requires every employer with one or more employees to carry workers’ compensation insurance or be approved as a self-insurer by the Alaska Workers’ Compensation Board (AWCB). There are no exemptions based on business type.

2026 Compensation Rate Figures

Spendable weekly wage (SWW) means gross weekly earnings minus payroll tax deductions (using the FICA rate of 7.65% for 2026). Temporary Total Disability (TTD) and Permanent Total Disability (PTD) are paid at 80% of the employee’s spendable weekly wage, subject to the minimum and maximum rates above.

Employer compliance requirements:

• Every employer with one or more employees must maintain workers’ compensation insurance through a licensed carrier or be approved as a self-insurer by the AWCB.
• Out-of-state employers with employees performing any work in Alaska must insure their Alaska exposure. Alaska does not have reciprocity agreements with any other state.
• Employers unable to obtain commercial coverage may access the Assigned Risk Pool administered by NCCI at 800-622-4123.
• All employers must file annual reports with the AWCB by March 1 each year.
• Employees must report injuries in writing to their employer within 15 days of the incident. Employers then have 10 days to report to the AWCB and their insurer.
• Uninsured employers may be assessed penalties up to $1,000 per employee per day. Workers’ Compensation Fraud Hotline: (888) 372-8330.

Source: labor.alaska.gov/wc — Division of Workers’ Compensation

Source: labor.alaska.gov/wc/bulletins.htm — Bulletin 25-06: 2026 Rates

Wrapping up

Alaska is about as simple as it gets for payroll taxes. There’s no state income tax at all, so the only deductions are federal income tax, Social Security, Medicare, and a small unemployment insurance contribution. One unique perk for residents is the annual Permanent Fund Dividend, a payment funded by oil revenues. Just keep in mind local sales taxes can vary by city, and minimum wage bumps to $14 an hour starting July 1, 2026.