Alaska Payroll Taxes and Withholding Guide (2026)

What Makes Alaska Payroll Different

Federal payroll tax is the same in every state. What changes from one state to the next is the second layer: state income tax withholding, employer unemployment taxes, and any employee social-insurance contributions. Alaska is one of the no-income-tax states, alongside Texas, Florida, Nevada, South Dakota, Tennessee, Washington, Wyoming, and New Hampshire, but it is unusual among them in one respect: it charges employees for unemployment insurance. Most states fund unemployment insurance entirely through employer taxes. Alaska splits it, and the employee share shows up on every pay stub until the wage base is reached.

The amounts are small. At 0.50% a worker earning $40,000 a year pays $200 for the year, and nobody pays more than $271 to a single employer in 2026. But it is a real deduction, and it surprises people who move to Anchorage or Fairbanks expecting a paycheck with only federal taxes on it. The federal baseline behind the other three lines is explained in the how payroll taxes work guide, and the FICA half of it is covered in the what is FICA tax guide.

Employee Withholding Overview in Alaska

An Alaska employee sees the three federal taxes plus one state contribution. There is no state income tax line and no local tax line.

The federal lines work identically to any other state. For Social Security, the 2026 wage base is $184,500, after which Social Security stops for the year. Medicare has no cap, and the 0.9% Additional Medicare Tax is withheld on wages above $200,000. The Alaska unemployment insurance line stops much earlier, at $54,200 of wages from each employer, so anyone earning more than that sees it disappear partway through the year.

Why Alaska Has No State Income Tax

Alaska had an individual income tax until 1980, when the Legislature repealed the net income tax on individuals and fiduciaries (Chapter 1, SSSLA 1980, approved September 24, 1980), funded instead by oil revenue after the Trans-Alaska Pipeline came online. For an employee this means there is no Alaska withholding certificate to complete, no state withholding table, no state income tax line on the pay stub, and no state individual income tax return to file. Only the federal Form W-4 matters for income tax.

Alaska also has no statewide sales tax. The state's Division of Community and Regional Affairs confirms that the State of Alaska does not levy a sales tax, but cities and boroughs may adopt one by local vote, and many have, so the rate at the register depends on where you shop. Anchorage, the largest city, has no local sales tax. None of these local taxes is withheld from a paycheck.

The Alaska Employee Unemployment Insurance Contribution

Alaska sets its unemployment insurance rates each year from the health of the UI trust fund. For 2026 the Department of Labor and Workforce Development's Research and Analysis Section held the employee rate at 0.50%, which is the statutory minimum, and raised the taxable wage base to $54,200 from $51,700. The wage base is calculated as 75% of the average annual wage paid in Alaska, rounded to the nearest $100: the average annual wage for state fiscal year 2025 was $72,332.45, which produced the 2026 figure.

Where the 0.50% Goes

Part of every employee contribution is redirected by statute to workforce training. The State Training and Employment Program (STEP, AS 23.15.630) receives 0.10% and the Technical and Vocational Education Program (TVEP, AS 23.15.835) receives 0.25%, both applied to the same wage base. The department's flow chart shows these as a credit against the employee UI contribution: of the $271.00 maximum for 2026, $189.70 goes to STEP and TVEP and $81.30 remains in the UI trust fund. The employee still pays 0.50% in total. Payroll systems usually show the whole amount on one line, often labelled AK UI or AK SUI EE, and it is commonly reported in box 14 of the W-2.

Getting a Refund of the Excess

The $54,200 base applies separately to each employer. A worker who holds two or more Alaska jobs in one year, which is common in fishing, tourism, construction, and oil field work, has 0.50% withheld by each employer on its own wages and can end the year above the $271 maximum. The Department refunds the excess on an Employee Application for Refund (Form 07-1466), filed with copies of every W-2 on or before December 31 of the year after the deductions were made. Processing starts April 1, after employers' fourth-quarter wage reports are in. If only one employer was involved and it withheld more than the maximum, the employer, not the state, must refund the overpayment.

Employer Payroll Obligations in Alaska

Because there is no state income tax to withhold, an Alaska employer's state-level payroll duties are unemployment insurance: paying its own employer contribution and withholding and remitting the employee contribution. Both are administered by the Employment Security Tax section of the Alaska Department of Labor and Workforce Development. The federal side, covered in the employer payroll tax obligations guide, includes the matching 6.2% Social Security and 1.45% Medicare plus the Federal Unemployment Tax (FUTA).

For 2026 the trust fund is solvent enough that every one of the twenty non-penalty rate classes sits at the 1.00% statutory minimum, and the new-employer industry table is 1.00% for every industry, from construction to accommodation and food service. That works out to a maximum employer cost of $542 per employee for the year. The employer rate includes a 0.40% Trust Fund Solvency Adjustment credit for 2026, unchanged from 2025. Employers can fold these costs into a cost-to-hire estimate with the employer payroll tax calculator.

Minimum Wage and How Tips Are Taxed in Alaska

Alaska's minimum wage increased from $13.00 to $14.00 per hour on July 1, 2026. Unlike most states, Alaska does not allow employers to count tips toward the minimum wage. The U.S. Department of Labor lists Alaska among the states that require employers to pay tipped employees the full state minimum wage before tips, so a server in Anchorage or a tour guide in Juneau or Denali earns at least $14.00 per hour in cash wages, and every reported tip is on top of that.

For payroll purposes, reported tips are wages. A tipped Alaska worker owes federal income tax withholding, Social Security (6.2%), and Medicare (1.45%) on reported tips exactly as on base pay, and tips count toward the wages subject to the 0.50% Alaska unemployment insurance contribution. There is no state income tax on them. The One Big Beautiful Bill Act created a federal deduction for a portion of qualified tips for tax years 2025 through 2028. It is a below-the-line deduction claimed on the worker's federal return, not a change to paycheck withholding, and it does not reduce Social Security or Medicare tax. Tipped workers can estimate it with the No Tax on Tips Calculator and read the mechanics in the No Tax on Tips guide.

The Permanent Fund Dividend Is Not Payroll

Every eligible Alaska resident receives an annual Permanent Fund Dividend from the state. It is sometimes confused with wages, but it has nothing to do with payroll. The dividend is paid by the Permanent Fund Dividend Division, not by an employer, and it is reported on Form 1099-MISC rather than a W-2. No federal tax, Social Security, Medicare, or unemployment insurance is withheld from it, and it does not count as wages for any of them.

The dividend is still federal income to the recipient, so it can create a balance due at filing for households receiving several dividends, especially since there is no withholding on it. The practical fix is on the paycheck side: add a Step 4c extra-withholding amount on the federal W-4 for the months after the dividend is paid, or make an estimated payment. The W-4 withholding guide explains how Step 4c works.

How Take-Home Pay Works in Alaska

The calculation sequence runs from gross pay down to net pay. Alaska adds one small state step to the federal sequence.

1. Start with gross wages for the pay period, including any reported tips.
2. Apply federal income tax withholding using the Form W-4 and IRS Publication 15-T.
3. Subtract Social Security (6.2%, up to the annual wage base) and Medicare (1.45%) on FICA wages.
4. Subtract the Alaska employee unemployment insurance contribution: 0.50% of wages until year-to-date wages from this employer reach $54,200.
5. There is no Alaska income tax and no local tax to subtract. The remainder is net pay.

To see exact figures for a specific salary or hourly rate and pay frequency, use the Alaska paycheck calculator or the general take-home pay calculator for a full pre-tax benefits stack.

Alaska Supplemental Wage Withholding

Supplemental wages are payments outside regular salary: bonuses, commissions, overtime, crew shares paid as wages, and back pay. Alaska has no state income tax, so there is no state supplemental rate to apply.

• No Alaska income tax on supplemental wages, because there is no state income tax at all.
• Supplemental wages are still wages for the Alaska unemployment insurance contribution, so 0.50% applies until the $54,200 base is reached.
• Federal income tax withholding on supplemental wages is a separate calculation set by the IRS, typically a flat 22% on amounts under $1 million, and Social Security and Medicare still apply under their own rules.

For the federal supplemental math on a bonus, use the Bonus Tax Calculator and see the Bonus Tax Withholding Guide.

Alaska Payroll Quick Facts (2026)

Frequently Asked Questions