Our comprehensive guide to taxes on retirement income, property and purchases, as well as special tax breaks for seniors, in every state. Go to Retiree Tax Map Alaska View State Compare List (0) selected | Compare up to 5 The Bottom Line Most Tax-Friendly One of Kiplinger's top ten most tax-friendly states for retirees, the Last Frontier is a true tax haven for retirees. Alaskans pay no state income tax or state sales tax. In addition, the state sends all permanent residents (who have lived there for at least one year) an annual dividend check from the state’s oil wealth savings account; for 2014, the dividend was $1,884. While Alaska taxes real estate, homeowners 65 and older, or surviving spouses 60 and older, are exempt from municipal taxes on the first $150,000 of the assessed value of their property. State Sales Tax The state does not have a sales tax. However, 104 municipalities impose local sales taxes, which can go as high as 7.5%. But, according to the Tax Foundation, the statewide average is 1.76%. Income Tax Range No state income tax. Social Security Benefits are not taxed. Exemptions for Other Retirement Income Retirement income is not taxed.IRAsRetirement income is not taxed.401(k)s and Other Defined-Contribution Employer Retirement PlansRetirement income is not taxed.Private PensionsRetirement income is not taxed.Public PensionsRetirement income is not taxed. Property Taxes Although taxing property is the primary method of raising revenues for most of the larger municipalities in the state, smaller municipalities favor a sales tax. This is primarily because the smaller incorporated areas lack a tax base large enough to support the property tax.Median property tax on the state's median home value of $254,000 is $3,008, according to the Tax Foundation.Tax breaks for seniors: Homeowners 65 and older (or surviving spouses 60 and older) are exempt from municipal taxes on the first $150,000 of assessed value of their property. Inheritance andEstate Taxes There is no inheritance tax or estate tax.