Alaska Retirement Tax Friendliness

Alaska Retirement Taxes

Taxes in Alaska are very low, especially if you are a senior. There is no state income tax, which means things like Social Security and pension payments are not taxed at all by the state.

In fact, Alaska pays people just to live in the state permanently. The Alaska Permanent Fund Dividend, which is $1,312 in 2023, goes to every Alaska resident. Additionally, there is no state sales tax in Alaska and no estate or inheritance tax.

There are, however, two reasons a senior might think twice before moving to Alaska. The first is the weather: It’s no secret that winters in Alaska are harsh. The second reason is the cost of living. On average, living expenses, like housing, utilities and transportation, are over 10% higher in Alaska than in the rest of the U.S.

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Is Alaska tax-friendly for retirees?

Alaska is very tax-friendly for retirees. In fact, it's tax-friendly for everyone. There is no state income tax in Alaska. Likewise, there is no statewide sales tax, although local governments can collect their own sales taxes up to 9.5%.

Property tax rates are slightly above the U.S. average. In some municipalities, however, seniors can exempt most or all of their home value from property taxes.

On top of all that, seniors and all other Alaska residents benefit from the Permanent Fund Dividend. This payment typically ranges from $800 to more than $2,000 per year, offsetting many of the other taxes that seniors may have to pay in Alaska. As noted earlier, the payment for 2023 is $1,312.

Is Social Security taxable in Alaska?

Since Alaska has no state or local income taxes, Social Security disbursements do not get taxed. Federal taxes on Social Security may still apply, however.

Are other forms of retirement income taxable in Alaska?

Income from savings, retirement accounts, pensions or any other source are not taxed. That can add up to thousands of dollars in tax savings per year as compared with other states that tax some or all of these as regular income.

How high are property taxes in Alaska?

Property taxes are really the only significant local tax in Alaska. The average effective rate across the state is 1.22%, slightly higher than the U.S. average. However, seniors in many cities benefit from exemptions.

What is the Alaska homestead exemption?

There is no statewide homestead exemption in Alaska, but many cities exempt seniors from paying property taxes on some or most of their home’s value. In Anchorage, for example, persons age 65 or older can exempt up to $150,000 of their principal residence from property taxes. So seniors who own and live in a home worth less than $150,000 could pay no property taxes at all.

How high are sales taxes in Alaska?

There is not sales taxes at the state level in the Last Frontier, but cities and boroughs (which are like counties) can collect their own local rates. These can range up to 9.5%. In Anchorage, there are no sales taxes.

What other Alaska taxes should I be concerned about?

While not a tax consideration, seniors should be aware of Alaska’s high cost of living. The median home value in Alaska is slightly higher than the national median ($282,800). Utilities are also pricier than the national average (largely thanks to the long, dark winters). Alaska’s low taxes may offset these high living expenses, but they’re an important element to keep in mind.