State and Local Tax Burden If You Retire in Alaska

Alaska offers retirees a lot of space, abundant opportunities for a wide variety of outdoor activities, spectacular scenery, and a varied climate. The cost of living varies considerably by location and is generally higher than in the lower 48 states. But Alaska has a very low state and local tax burden, 6.3% of income in 2009 according to the Tax Foundation, compared to the national average of 9.8%.

Alaska has no state income tax or state sales tax, although some municipalities in Alaska have a local sales tax. Property taxes in Alaska are limited to certain cities and boroughs.

Property taxes

As explained by the Alaska Office of the State Assessor, much of the land in Alaska is not subject to property taxes. Many of the communities are unincorporated and cannot levy a property tax. 18 of the incorporated communities are organized into boroughs and 14 of the boroughs levy a property tax. Outside of these boroughs, there are 11 cities that levy a property tax. Anchorage, Fairbanks and Juneau have a property tax. You can find the boroughs and cities that have a property tax under Information about Alaska's Taxing Jurisdictions and Municipal Taxation on the Alaska Office of the State Assessor website.

Homeowners in Alaska who are 65 or older are exempt from property taxes on the first $150,000 of the assessed value of their property. Veterans who have a 50% or more service-connected disability are also eligible for this exemption. According to the Alaska Office of the State Assessor, this amounted to an average property tax exemption of $1,839 for 2010.

Sales tax

Alaska does not have a state sales tax. According to the Alaska Office of the State Assessor, 62 municipalities levy a general sales tax. The highest rate is 7% and most rates are between 2 and 5%. Anchorage and Fairbanks do not have a sales tax (as of 2010). Juneau levies a 5% sales tax. You can find the rate for each municipality under Information about Alaska's Taxing Jurisdictions and Municipal Taxation.

Other local taxes include taxes on raw fish, "bed" taxes for hotels and motels, severance taxes, liquor and tobacco taxes, gaming taxes, and fuel transfer taxes.

Permanent Fund Dividends

The Alaska Permanent Fund pays Alaska residents a dividend from revenue earned by the state from mineral lease rentals, royalties, royalty sales proceeds, federal mineral revenue-sharing payments and bonuses. According to the Alaska Permanent Dividend Division, you are eligible to receive a dividend if you were a resident of Alaska the entire year, you intend to remain an Alaska resident indefinitely, and you have not claimed residency in any other state or country during the past year. The permanent fund dividend for 2010 is $1,281. The Alaska permanent fund dividend is subject to federal income tax.

Sources:

Alaska Tax Facts, Alaska Office of the State Assessor

Alaska Taxable, State of Alaska

The Facts on Alaska's Tax Climate, Tax Foundation

FAQ About Living in or Moving to Alaska, Elise Tomlinson

Information about Alaska's Taxing Jurisdictions and Municipal Taxation, Alaska Office of the State Assessor

Permanent Fund Dividend Division Eligibility, State of Alaska