How Alaska Taxes LLCs in 2025
Alaska stands out as one of the most tax-friendly states in the nation for LLC owners. It is one of only nine states that impose no personal income tax, meaning LLC members who operate pass-through entities pay zero state income tax on their business profits. This applies to single-member LLCs, multi-member LLCs, and partnerships alike.
While Alaska does not tax individual income, it does impose a corporate income tax on LLCs that elect C-corporation taxation. The corporate tax ranges from 0% to 9.4% across ten brackets, making it one of the highest corporate rates among states that have no personal income tax. However, the vast majority of LLC owners use pass-through taxation and avoid this entirely.
Key Advantage: Alaska is one of only two states (along with New Hampshire) that has neither a personal income tax nor a state sales tax, making it exceptionally attractive for LLC owners who sell goods.
Alaska LLC Annual Requirements
Although Alaska does not tax LLC income, it does require LLCs to file a Biennial Report with the Alaska Division of Corporations. This report is due every two years on January 2nd and costs $100 (or $50 for domestic LLCs filing online). Failure to file can result in involuntary dissolution of your LLC.
Additionally, Alaska requires a business license for most businesses. The Alaska business license costs $50 per year and must be renewed annually. Certain professions may require additional licenses or permits.
Alaska Corporate Income Tax (C-Corp Election Only)
If your LLC elects to be taxed as a C-corporation, Alaska imposes corporate income tax at the following graduated rates:
| Taxable Income | Tax Rate |
|---|---|
| $0 - $25,000 | 0% |
| $25,001 - $49,000 | 2% |
| $49,001 - $74,000 | 3% |
| $74,001 - $99,000 | 4% |
| $99,001 - $124,000 | 5% |
| $124,001 - $148,000 | 6% |
| $148,001 - $173,000 | 7% |
| $173,001 - $198,000 | 8% |
| $198,001 - $222,000 | 9% |
| Over $222,000 | 9.4% |
Federal Taxes for Alaska LLCs
Even though Alaska does not impose state income tax, LLC owners still owe federal taxes. These include:
- Self-Employment Tax (15.3%): This covers Social Security (12.4% on income up to $176,100 in 2025) and Medicare (2.9% on all income, plus 0.9% Additional Medicare Tax on income exceeding $200,000 for single filers).
- Federal Income Tax: Taxed at your personal rate based on 2025 brackets ranging from 10% to 37%.
- Quarterly Estimated Payments: Since LLC members do not have taxes withheld, estimated payments are due April 15, June 15, September 15, and January 15.
Alaska Permanent Fund Dividend (PFD)
One unique advantage of being an Alaska resident is the Permanent Fund Dividend, an annual payment made to all qualifying Alaska residents from the state's oil revenue investment fund. In 2024, the PFD was $1,702 per person. While this is not directly related to LLC taxation, it provides additional income to Alaska residents that can help offset federal tax obligations.
Tax Savings Example: An LLC earning $100,000 in Alaska saves approximately $5,000-$7,000 compared to operating the same LLC in a state with average income tax rates (around 5-7%), since Alaska charges zero state income tax on pass-through income.
Alaska Sales Tax Considerations
Alaska has no state sales tax, but local municipalities can impose their own sales taxes. Currently, over 100 Alaskan municipalities levy local sales taxes ranging from 1% to 7.85%. The average combined local rate is approximately 1.82%. Notable rates include:
- Juneau: 5% city sales tax
- Kodiak: 7% combined borough and city tax
- Anchorage: 0% (no local sales tax)
- Fairbanks: 0% (no local sales tax)
Alaska LLC Formation Costs
Starting an LLC in Alaska involves these costs:
- Articles of Organization filing fee: $250
- Business license: $50/year
- Biennial Report: $100 every two years ($50 online for domestic LLCs)
- Registered Agent: Required; can be a resident individual or registered agent service (typically $100-$300/year)
Employment Taxes in Alaska
If your Alaska LLC has employees, you are responsible for:
- Alaska Unemployment Insurance (UI): Employer-paid, with rates varying from 1% to 5.4% on the first $47,100 of each employee's wages (2025 taxable wage base).
- Workers' Compensation: Required for all employers in Alaska, with rates varying by industry classification.
- Federal payroll taxes: Social Security, Medicare, and federal unemployment (FUTA) apply as in all states.
Advantages of an Alaska LLC
Alaska offers several compelling advantages for LLC owners:
- No state income tax on personal or business income
- No state sales tax (though local taxes may apply)
- Asset protection: Alaska has some of the strongest asset protection trust laws in the US
- Permanent Fund Dividend for Alaska residents
- Low regulatory burden compared to many other states
- Biennial reporting (every 2 years instead of annually)
Disadvantages of an Alaska LLC
Despite the tax advantages, there are some drawbacks to consider:
- Higher formation costs: $250 filing fee is above the national average
- Remote location: Physical presence requirements may be challenging for mainland businesses
- Higher cost of living: Operating costs in Alaska tend to be higher than the continental US
- Limited in-person services: Fewer business service providers compared to major metropolitan areas
Alaska LLC vs. Other No-Income-Tax States
| State | Income Tax | Sales Tax | LLC Annual Fee | Filing Fee |
|---|---|---|---|---|
| Alaska | None | None (local only) | $100 biennial | $250 |
| Wyoming | None | 4% | $60/year | $100 |
| Nevada | None | 6.85% | $350/year | $425 |
| Florida | None | 6% | $138.75/year | $125 |
| Texas | None | 6.25% | $0 (franchise may apply) | $300 |
| South Dakota | None | 4.5% | $50/year | $150 |
| Tennessee | None | 7% | $300 min/year | $300-$3,000 |
| New Hampshire | 5% (on interest/dividends only) | None | $100/year | $100 |
| Washington | 7% cap gains only | 6.5% | $0 | $200 |
Filing Deadlines for Alaska LLCs
Since Alaska has no state income tax, there are no state tax filing deadlines for pass-through LLCs. However, you must meet these requirements:
- Federal tax return: April 15 (Form 1040 with Schedule C or Form 1065)
- Business license renewal: December 31 annually
- Biennial Report: January 2 of every even-numbered year
- Estimated tax payments: Federal quarterly estimates still apply (April 15, June 15, September 15, January 15)
Common Mistakes Alaska LLC Owners Make
- Assuming no taxes are owed: While there is no state income tax, federal self-employment tax and income tax still apply.
- Forgetting the biennial report: Missing the January 2 deadline can lead to involuntary dissolution.
- Neglecting local taxes: Some municipalities impose sales taxes and property taxes that affect your LLC.
- Not maintaining a registered agent: Alaska requires a registered agent with a physical Alaska address.
- Ignoring multi-state obligations: If your Alaska LLC does business in other states, you may owe taxes in those states.
Tax Deductions for Alaska LLC Owners
Alaska LLC owners can take advantage of the same federal tax deductions as LLCs in any state:
- Qualified Business Income (QBI) Deduction: Up to 20% of qualified business income under Section 199A
- Self-employment tax deduction: Deduct half of SE tax as an above-the-line deduction
- Home office deduction: Especially valuable in Alaska where home office space may be significant
- Business expenses: All ordinary and necessary business expenses (supplies, equipment, travel, etc.)
- Health insurance premiums: Self-employed health insurance deduction for LLC members
- Retirement contributions: SEP IRA, SIMPLE IRA, or Solo 401(k) contributions