If you live in Alaska, or you are deciding where to land after the military, here is the simplest benefit in the state's whole stack: Alaska has no personal income tax. Not on your military retired pay, not on your drill pay, not on your civilian salary, not on your investment income. For a Veteran household bringing in $48,000 of taxable income, that is roughly $2,400 a year that a typical income-tax state would take and Alaska does not. And instead of taxing residents, Alaska pays them, through the annual Permanent Fund Dividend.
What it is
Alaska is the only state that ever had a personal income tax and repealed it. The legislature eliminated the individual income tax in 1980, after Trans-Alaska Pipeline oil revenue started flooding the treasury, and it has never come back (Alaska Legislature history of the individual income tax). The Alaska Department of Revenue Tax Division confirms it plainly: the State of Alaska currently does not have an individual income tax, and no employee withholding for state income tax is required.
In practice that means:
- No state tax return to file, ever. There is no Alaska Form 1040 equivalent for individuals.
- No state withholding coming out of your paycheck, your retired pay, or your pension.
- No state tax on retirement account withdrawals, capital gains, interest, or dividends.
This is not a Veteran-specific exemption you apply for. It is the baseline for every Alaska resident. We include it in your benefits picture because state income tax is one of the biggest levers in the "where should I live after service" decision, and Alaska sits at the far end of that lever.
What it's worth
The honest math first. The $2,400 figure is a modeled comparison, not money Alaska sends you. It answers one question: what would a typical 5% state income tax take from $48,000 of taxable income? Answer: $48,000 x 5% = $2,400 per year. Your real number depends on your income and on which state you are comparing against. A retiree with $90,000 of combined income comparing against a high-tax state could be looking at several times that. Someone with modest income comparing against a state that already exempts military retired pay might see much less.
Now the part most guides get wrong, and we will not.
VA disability compensation is federally tax free everywhere. No state taxes it. If your only income is VA disability compensation, Alaska's lack of an income tax saves you nothing compared to any other state, because that money was never taxable anywhere. Do not pick a state based on disability compensation taxes. There is no such thing.
Where Alaska actually has an edge is everything else on your 1040:
- Military retired pay. Some states still tax it, fully or above a capped exemption amount. Alaska cannot tax it, because Alaska taxes nothing.
- Guard and Reserve drill pay. Taxed as ordinary income in many states. Untaxed in Alaska.
- Your civilian paycheck. This is the big one most Veterans overlook. Plenty of states exempt military retired pay but tax your post-service salary at full rates. In Alaska, your second career is untaxed too.
- Spouse income, retirement withdrawals, side businesses, investments. All of it, untaxed at the state level.
The bonus that makes Alaska unique: the Permanent Fund Dividend. Alaska residents do not just skip state income tax, they get paid a dividend from the state's oil wealth fund. Every eligible resident who applies receives it, adults and children alike, so a family of four collects four dividends. The amount changes every year with fund performance and legislative decisions; the 2025 dividend was $1,000 per person (pfd.alaska.gov). Check the current year's figure there before you count on a number.
Who qualifies (and who doesn't)
For the tax treatment: every Alaska resident. There is no application, no rating requirement, no discharge requirement. If Alaska is your state of residence, your income is not subject to a state income tax, because none exists.
For active duty members, this runs through your state of legal residence. Under the Servicemembers Civil Relief Act, your military pay is taxed by your state of legal residence, not the state where you happen to be stationed. A service member whose legal residence is Alaska keeps that no-income-tax treatment on military pay while stationed elsewhere. Legal residence is not a box you casually check; it requires genuine ties and intent to return. Talk to your installation's legal assistance office before changing it, and see our SCRA and MLA protections guide for how these rules work.
For the PFD, the rules are stricter than the tax side (PFD military eligibility):
- You must be an Alaska resident for the full qualifying year and intend to remain one.
- Active duty members stationed outside Alaska can stay eligible, but you generally must return to Alaska for at least 72 consecutive hours every two years and keep proof of travel. The PFD Division can waive this in certain circumstances; contact the division to confirm yours qualifies.
- Absences longer than five years trigger extra scrutiny, including a questionnaire and a requirement showing at least 30 cumulative days in Alaska over the past five years.
- Spouses and children accompanying an eligible Alaska resident on military orders can remain eligible too.
Who doesn't benefit: nonresidents, obviously. If you work in Alaska but keep legal residence in a taxing state, that state can still tax your income. And as noted above, a Veteran whose entire income is VA disability compensation gains nothing on the tax side relative to other states, though the PFD is still real money if you establish residency.
How to claim it
There is no form for the income tax benefit. It happens automatically the moment Alaska is your state of residence. The steps that matter:
- Establish Alaska residency. Move there with intent to remain. The usual markers: an Alaska driver's license, voter registration, vehicle registration, and a physical presence.
- Active duty and want Alaska as your legal residence? Go through your finance office and legal assistance office to change your state of legal residence properly. Doing it wrong, or doing it purely to dodge another state's tax, can create back-tax problems with your old state.
- Stop any old-state obligations cleanly. File a final part-year return in the state you left so it does not keep expecting returns from you.
- Apply for the PFD every year. Applications are accepted January 1 through March 31, online at pfd.alaska.gov or on paper at distribution centers. Each family member files their own application. Deployed members can file online or through a power of attorney.
- Keep your federal filing unchanged. Alaska's benefit is state-level only. Your federal income tax works exactly the same as anywhere else.
Deadlines
The tax benefit has no deadline because there is nothing to file. The PFD does: the application window runs January 1 through March 31 each year, per the PFD filing period page. Miss it and you generally miss that year's dividend. The one narrow exception: a member deployed and receiving hostile fire or imminent danger pay has 90 days after that pay ends to file late, per the PFD Division. Everyone else, put it on the calendar every January, or have a power of attorney file for you.
Related benefits
State taxes are one input in the bigger where-to-live decision. Round out the picture:
- Your first 90 days after separation walks through the state-picking decision alongside everything else on the clock.
- CRDP vs CRSC explains how your retired pay and disability offset interact, which determines how much retired pay you actually have for a state to tax or not tax.
- The state benefits calculator shows Alaska's full Veteran stack, including the property tax exemption and hunting and fishing license benefits, not just the tax picture.
What to do next
If Alaska is on your shortlist, run the numbers on your actual income mix instead of a generic average. The state benefits calculator compares what each state offers Veterans at your rating and situation.
Then start your free benefits scan and we will check you against over 4,000 federal and state benefits, each with a dollar value and an official source, so the tax picture is one line in a much bigger total.