Military Retirement in Alaska: Complete 2026 Tax Guide
NO state income tax + annual PFD dividend bonus
🎯 Quick Summary: Alaska Military Retirement Taxes (2026)
- ✓ Military retirement pay: NO state income tax
- ✓ VA disability payments: Tax-free (federal and state)
- ✓ Permanent Fund Dividend: ~$1,700/person annually (2025)
- ✓ State sales tax: NONE (some localities have small taxes)
- ✓ Property tax: Exemptions for disabled veterans up to $150,000
Why Alaska Is Unique for Military Retirement
Alaska offers a truly unique retirement package for military veterans. As one of only nine states with no state income tax, Alaska allows you to keep 100% of your military retirement pay (minus federal taxes). But Alaska goes further—residents receive an annual Permanent Fund Dividend (PFD) just for living there, typically $1,500-$2,000 per person.
While Alaska has a higher cost of living than the lower 48, the combination of no state income tax, no state sales tax, and the PFD can offset much of that difference. Add in world-class outdoor recreation, stunning natural beauty, and a strong military community around JBER and Fort Wainwright, and Alaska becomes a compelling choice for adventurous retirees.
2026 Alaska Military Retirement Tax Breakdown
State Income Tax on Military Retirement Pay
🎉 ZERO State Income Tax!
Alaska does not have a state income tax. This applies to ALL income, including military retirement pay, pensions, wages, investment income, and business income. Your military pension is only subject to federal income tax.
VA Disability Compensation
✓ Completely Tax-Free
VA disability payments are tax-exempt at both the federal and Alaska state levels. Whether you receive 10%, 100%, or any rating in between, you keep every dollar.
Alaska Permanent Fund Dividend (PFD) for Veterans
💰 Annual Cash Bonus Just for Living Here
The Alaska Permanent Fund Dividend is an annual payment to Alaska residents from state oil revenues. In 2025, the PFD was approximately $1,702 per person.
- • Family of 2: ~$3,400/year extra income
- • Family of 4: ~$6,800/year extra income
- • Requirement: Alaska resident for full calendar year
- • Note: PFD is taxable at federal level but not state level
Other Tax Benefits for Alaska Veterans (2026)
| Benefit | Details |
|---|---|
| Property Tax Exemption |
|
| Sales Tax | NO state sales tax. Some local areas have small local taxes (0-7.5%), but most of Alaska is sales tax-free. |
| Vehicle Registration | Disabled veterans may qualify for reduced or waived vehicle registration fees. |
| Hunting/Fishing Licenses | Disabled veterans (50%+) get free hunting and fishing licenses. Active duty stationed in Alaska also qualify. |
Real Example: How Much You'll Save in Alaska (2026)
Let's compare a military retiree in Alaska vs. California:
Example Scenario: E-7 Retired After 20 Years (Family of 2)
- • Military retirement pay: $2,800/month ($33,600/year)
- • VA disability (70%): $1,916/month ($22,992/year)
- • Part-time civilian job: $25,000/year
- • Base income: $81,592
Alaska Benefits
State income tax: $0
PFD (2 people): +$3,404
Net gain: +$3,404
California
Partial exemption, still pays on some income
State tax: ~$2,100
Annual Alaska Advantage: $5,500+
Over 20 years: $110,000+ benefit
🎓 Education Benefits for Veterans & Families in Alaska
University of Alaska Veteran Benefits
- In-State Tuition: Veterans qualify for in-state tuition immediately regardless of prior residency
- Prior Learning Assessment: Free evaluation of military training for college credit
- Yellow Ribbon Program: UA participates fully—covering costs above GI Bill limits
- Veteran Services: Dedicated veteran centers at UAA, UAF, and UAS campuses
Alaska Performance Scholarship (for Dependents)
- Up to $4,755/year for Alaska high school graduates
- Available at University of Alaska campuses and vocational programs
- Children of veterans who establish residency can qualify
Free Tuition for National Guard
- Alaska National Guard members receive 100% tuition waiver at UA system
- Great option for retirees who join the Guard for additional benefits
Cost of Living in Alaska for Military Retirees (2026)
Alaska has a cost of living 24% above the national average, but tax benefits help offset this:
| Category | Alaska vs. National Average | Notes |
|---|---|---|
| Housing | +25% more expensive | Median home: $360,000. More affordable outside Anchorage. |
| Groceries | +30-40% more expensive | Due to shipping costs. Commissary access helps significantly. |
| Healthcare | +15% more expensive | VA healthcare and TRICARE offset costs for most veterans. |
| Utilities | +50% more expensive | Heating costs are significant. Natural gas available in Anchorage. |
| Tax Offset | $0 state income tax + PFD | No state income or sales tax + ~$1,700/person PFD annually. |
Major Military Installations in Alaska
Alaska has strategic importance for national defense, with several major installations supporting approximately 21,000 active-duty personnel:
🏰 Joint Base Elmendorf-Richardson (JBER)
- Location: Anchorage
- Combined Army/Air Force installation
- Home of 11th Airborne Division
- F-22 Raptor operations
- Largest military installation in Alaska
🏰 Fort Wainwright
- Location: Fairbanks
- Army post for cold-weather training
- Home of 1st Stryker Brigade Combat Team
- Arctic warfare specialists
✈️ Eielson Air Force Base
- Location: Near Fairbanks
- F-35A Lightning II operations
- Red Flag-Alaska exercises
- 354th Fighter Wing
🛰️ Clear Space Force Station
- Location: Anderson (near Fairbanks)
- Ballistic missile early warning
- Space surveillance operations
VA Healthcare in Alaska
🏥 VA Alaska Healthcare System
- • Anchorage VA Medical Center: Full-service hospital with specialty care
- • Fairbanks VA Clinic: Primary care and mental health services
- • Community-Based Outpatient Clinics: Locations in Kenai, Mat-Su, Juneau, and more
- • Telehealth: Extensive telehealth network for remote areas
- • TRICARE: Good network coverage in Anchorage and Fairbanks areas
Pros and Cons of Retiring in Alaska
✅ Pros
- ✓ NO state income tax on any income
- ✓ Annual PFD dividend ($1,500-$2,000/person)
- ✓ NO state sales tax
- ✓ World-class fishing, hunting, outdoor recreation
- ✓ Strong military community at JBER
- ✓ Free hunting/fishing licenses for disabled vets
- ✓ Stunning natural beauty
- ✓ Low crime rates in most areas
❌ Cons
- ✗ High cost of living (24% above average)
- ✗ Expensive groceries due to shipping
- ✗ Long, dark winters (especially interior)
- ✗ Limited healthcare options outside major cities
- ✗ Expensive to travel to lower 48
- ✗ High heating costs
- ✗ Fewer civilian job opportunities
- ✗ Isolation from family in lower 48
Frequently Asked Questions
How long do I need to live in Alaska to get the PFD?
You must be an Alaska resident for the entire calendar year (January 1 - December 31) before the year you apply. You must also intend to remain an Alaska resident indefinitely.
Is the PFD taxable?
The PFD is NOT taxed at the state level (Alaska has no income tax), but it IS taxable at the federal level as ordinary income.
Can I use TRICARE in Alaska?
Yes. TRICARE has good coverage in the Anchorage and Fairbanks areas with multiple network providers. Rural areas may have more limited options, but telehealth is available.
What's the best city for military retirees in Alaska?
Anchorage is the best choice for most retirees—it has the largest VA medical center, best TRICARE network, commissary/exchange access at JBER, milder winters than interior Alaska, and the most civilian amenities.
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