Everything You Need to Know About Alaska State Taxes
The Alaska Department of Revenue (DOR) is in charge of administering and controlling the state’s tax system. In addition to collecting taxes, the department issues an annual overview of its operations and information on any state laws that affect the tax division.
While Alaska doesn’t impose a personal income tax on residents, it does have a property tax system. When compared to other states’ average property taxes, Alaska ranks 20th, with a 1.02% average property tax rate. The median property taxes that residents paid was $2,047, ranking Alaska 11th when compared to other states.
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Alaska Income Tax
If you earn income, you’re responsible for paying federal income taxes on what you earned. Alaska is the only state that doesn’t collect income tax on any personal income, whether it was earned or unearned. This includes income you earn from working or interest earned through investments. Therefore, you’re not required to file a tax return with the state.
Alaskan residents may be eligible to receive annual payments from the Alaska Permanent Fund Corporation, which manages the Alaska Permanent Fund. A Permanent Fund Dividend (PFD) is provided to residents who lived in the state for at least one year and who intend to maintain full-time residency.
The Alaska Permanent Fund is funded primarily through petroleum revenues, as is most state government activities and services. The DOR provides a public annual report on its revenue streams and operations for residents to review.
Alaska Sales Tax
Alaska does not charge a sales tax on transactions that occurred in the state. However, each jurisdiction has the right to impose its own local sales tax, which can range from 1% to 7%. There are currently 107 local governments that impose a local sales tax. Use the Alaska Current Taxable Report to find out which municipalities charge sales tax and the rate you may be required to pay.
Alaska Property Tax
Property taxes are the main source of revenue for local governments. While most property owners are required to pay property taxes, there are some exemptions. Residents who are 65 or older or veterans living with service-connected disabilities are entitled to an exemption that applies to the first $150,000 of assessed value on their property. To qualify, the property must be their primary residence and they must apply for the exemption with the state assessor’s office.
Individual municipalities have the right to enact additional property tax exemptions as they see fit. Some of these municipalities also increase the tax exemption provided to veterans who are disabled and residents who are 65 years or older. You can contact your local government specialist to find out about additional exemptions in your municipality.
Alaska Estate and Inheritance Tax
The state of Alaska does not impose inheritance or estate taxes on residents. Preliminary notices and estate tax returns are not required.
Other Taxes in Alaska
Although you won’t need to file a tax return to pay state income taxes in Alaska, the state government does have other taxes it imposes, including the following:
- Alcoholic beverage tax: The Alaskan state government charges taxes on alcohol which equate to $1.07 per gallon of malt beverage or hard cider, $2.50 per gallon or wine, $12.80 per gallon of liquor, and 35 cents per gallon of craft beer;
- Cigarette and tobacco tax: An excise tax is imposed on cigarettes and tobacco products, which applies when these products are imported into the state. The importer must pay 75% of the wholesale price of these imported products.
- Motor fuel tax: Motor fuel that’s used, sold, or transferred is subject to a state tax of 8 cents per gallon of highway fuel, as well as a motor fuel surcharge of $0.0095 per gallon.
Filing Taxes In Alaska
It’s important to prepare to file your federal income taxes so you can meet the April 15 deadline. While you’re not responsible for filing income taxes with the state of Alaska, if you own property, look for your property tax bill in the mail. When you pay it on time, you won’t be subject to any late penalty fees.
If you qualify for a PFD, it’s also important to file your application so you can receive the dividend you deserve. You can use the myAlaska online system to apply for your dividend. You must create an account with the site and provide your identification information to complete the application online. You must electronically sign your PFD application to successfully submit it.
Once it’s complete, you can log back into your account to check your status and the dividend amount you’ll receive. If you prefer, you can visit a local distribution center to obtain a paper application.
While Alaska doesn’t require you to submit a state income tax return, it’s still important to thoroughly understand the state’s tax system. You may qualify for property tax exemptions or for a dividend from the Alaska Permanent Fund. By ensuring you understand these tax laws, you can receive the tax benefits you’re entitled to as a state resident.
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This post was updated February 20, 2020. It was originally published February 20, 2020.