Overview of Alaska Retirement Tax Friendliness
Alaska has no state income tax. That means the state doesn’t tax Social Security retirement benefits or pension payments. Additionally, there is no state sales tax in Alaska and no estate or inheritance tax.
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- Our Expert
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 $1,114 in 2021, 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 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.
A financial advisor in Alaska can help you plan for retirement and other financial goals. Financial advisors can also help with investing and financial plans, including taxes, homeownership, insurance and estate planning, to make sure you are preparing for the future.
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. These are relatively low and average just 1.76%.
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 seniors may have to pay in Alaska.
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 1.18%, 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?
Sales taxes are fairly low in the Last Frontier. There is no statewide sales tax, but cities and boroughs (which are like counties) can collect their own local rates. These average to just 1.76%. 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 about 35% higher than the national median. Utilities are roughly 25% 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.