Alaska Capital Gains Tax, Explained

Alaska is the one state on this list that actually had an income tax and got rid of it. Individuals paid Alaska income tax for decades, until the Trans-Alaska Pipeline started moving oil in the late 1970s and state revenue exploded. In September 1980, Governor Jay Hammond signed the repeal, making Alaska the last state in the country to eliminate a personal income tax it had previously collected. The state hasn't reinstated one in the more than four decades since.

What replaced it wasn't a different tax on individuals, it was oil. Alaska funds state government primarily through severance taxes on oil and gas production, royalties from state-owned oil and gas leases, and investment earnings from the Permanent Fund. There is no state general sales tax either, though many municipalities and boroughs levy their own local sales tax. For an individual selling stock, a business, or real estate, the practical result matches Texas or Wyoming: no state income tax return, no state capital gains form, nothing to file.

Zero state tax doesn't mean zero tax. The federal government taxes a gain the same in Anchorage as in Atlanta, the federal capital gains brackets just become the whole bill instead of the first layer. Three federal pieces matter:

Worked example. A married couple in Anchorage earns $150,000 in W-2 income and sells long-held index funds for a $300,000 gain. Alaska collects $0. Federally, the gain sits in the 15% bracket: $45,000. Their MAGI is $450,000, so the $200,000 of income above the $250,000 NIIT threshold picks up the 3.8% surtax: $7,600. Total bill: $52,600, about 17.5% all-in, and every dollar of it federal. The same sale in a high-tax state could add five figures of state tax on top.

One thing zero state tax doesn't eliminate: the payment-timing problem. A six-figure gain usually means a quarterly estimated tax payment to the IRS in the quarter of the sale, Alaskans skip the state voucher, not the federal one.

This is the part of the Alaska story that's genuinely different from Texas or Wyoming, and worth understanding before you build a multi-decade plan around it. All three states tax capital gains at 0% today. They don't all get there the same way, and they don't all stay there with the same guarantee.

None of this changes what you owe today. It's a planning-horizon consideration, most relevant if you're weighing Alaska residency as part of a long exit timeline rather than a near-term sale.

Every eligible Alaska resident receives an annual Permanent Fund Dividend, a cash payment drawn from earnings on the state's oil-wealth investment fund. It has nothing to do with your capital gains rate, it's ordinary income, reported to you on Form 1099-MISC and included on your federal return, not a dividend or capital gain in the tax-code sense despite the name. Most years it doesn't move the needle on a major asset sale.

Unlike Texas or Wyoming, Alaska is not a clean zero across the board. Texas has its franchise tax and Wyoming its LLC license fee, but neither taxes business income directly. Alaska does: the state runs a graduated corporate income tax on C-corporations with Alaska-source income, ranging from 0% up to 9.4%, with the top rate applying once taxable income clears roughly $222,000. If a business organized as a C-corp sells appreciated assets, that gain can be taxed at the entity level in Alaska, even though an individual seller of the same asset owes the state nothing.

This doesn't touch most individual sellers. S-corporations, partnerships, LLCs taxed as either, and sole proprietorships are pass-through entities, their income lands on the owner's personal return, where Alaska's rate is 0%. The corporate income tax only bites if the selling entity is a C-corp, which makes entity structure a real planning question here in a way it usually isn't in Texas or Wyoming. If you're selling a business and the entity is currently a C-corp, that's worth modeling before you price the deal, not after.