The short answer
Alaska has no individual income tax, so a 1031 exchange of Alaska real estate defers only federal tax; the state has nothing to defer, no closing withholding and no post-exchange reporting. The Alaska-specific issues are elsewhere: a 2024 law bars the state, boroughs and cities from taxing real estate transfers, property tax is levied only by boroughs and cities under a 3 percent cap, and corporate sellers do face Alaska's 0 to 9.4 percent corporate income tax. For Alaskans exchanging into a DST, the new consideration is income tax owed to the states where the DST's real estate is located.
Alaska at a glance
| State income tax on real estate gains | None for individuals; Alaska has no personal income tax |
|---|---|
| Corporate sellers | Alaska corporate income tax 0%–9.4%; 9.4% on taxable income of $222,000 and over |
| §1031 conformity | Corporate tax starts from federal taxable income, so the federal deferral carries through |
| Withholding at closing | None; Alaska has no nonresident real estate withholding |
| Transfer tax | None; Chapter 28 SLA 2024 bars state, borough and city taxes on real property transfers |
| Deferred-gain tracking | None; no Alaska information return follows deferred gain |
| Property tax | Municipal only; AS 29.45.090 caps a municipality's levy at 3% of assessed value |
| Married owners | Opt-in community property by agreement or trust (AS 34.77) |
Alaska has no personal income tax, so the state defers nothing and claws back nothing
An individual, trust or pass-through owner selling Alaska real estate owes no Alaska income tax on the gain, exchange or not. Alaska has no individual income tax and no state sales tax, so there is no Alaska gain to defer, no Alaska counterpart to Form 8824 and no state form to file when the exchange closes.
That also means Alaska has no nonresident withholding at closing and no annual tracking of deferred gain of the kind California imposes with its FTB 3840. An out-of-state investor selling an Alaska rental deals only with the IRS and with their own home state.
The absence of a state income tax does not shrink the federal work. The identification and closing deadlines, the intermediary and the like-kind rules apply in Anchorage exactly as in Austin; see the eligibility requirements if you are new to the process.
Corporations are the exception: Alaska's corporate income tax runs to 9.4 percent
Alaska does levy a corporate income tax, graduated from 0 percent on taxable income of $25,000 and below to 9.4 percent on taxable income of $222,000 and over, according to the Alaska Department of Revenue Tax Division. A C corporation that sells Alaska real estate at a gain therefore has a state tax at stake.
Alaska taxable income is based on federal taxable income with Alaska adjustments, so a gain deferred under §1031 on the federal return is not in the corporation's Alaska base either. For a corporate owner the exchange defers two taxes, federal and Alaska, and the Alaska one is the higher rate on the marginal dollar.
Most individual investors hold Alaska rentals directly or through an LLC taxed as a partnership, in which case the corporate tax is irrelevant. Confirm your entity's classification with your CPA before assuming Alaska has no stake in your sale.
Chapter 28 SLA 2024 bars the state, boroughs and cities from taxing real estate transfers
Alaska has no state deed or transfer tax, and since 2024 municipalities cannot create one. Senate Bill 179, signed into law on August 13, 2024 as Chapter 28 SLA 2024, added AS 29.45.650(l) and AS 29.45.700(h), which provide that a borough or city 'may not levy or collect a sales or use tax on the transfer of real property', and AS 43.98.035, which bars the state from doing so.
The prohibition applies to home rule and general law municipalities alike; the only carve-out is for an ordinance a municipality had already adopted before the act took effect. For an exchanger the practical effect is that recording costs on an Alaska relinquished or replacement deed are recording fees only, with no percentage-of-price tax to budget on either side.
Compare that with the 4 to 5.5 percent Measure ULA tax in Los Angeles or Arkansas's $3.30 per $1,000: an Alaskan buying replacement property in another state may encounter a transfer tax for the first time.
Property tax is borough and city business, capped at 3 percent of assessed value
Property tax on ordinary real estate in Alaska is municipal. AS 29.45 governs borough and city levies, and AS 29.45.090 provides that a municipality may not levy an ad valorem tax in a year 'in excess of three percent of the assessed value of property in the municipality', with all property taxed at the same rate. Whether a parcel pays property tax at all, and at what rate, therefore depends on where in Alaska it sits.
For an investor exchanging out of Alaska property, the relevant question is what the replacement property's jurisdiction charges. The Tax Foundation reports an effective property tax rate of 0.94 percent on owner-occupied housing value in Alaska and that property taxes supply 32.1 percent of state and local tax revenue; the replacement property's own jurisdiction will set the rate the investor pays next.
Alaska has no acquisition-value assessment cap, so a sale does not itself trigger a reassessment the way it does under California's Proposition 13; municipal assessors value property on their own schedules.
Alaska's opt-in community property and trust laws for married owners
Alaska is not a community property state by default, but the Alaska Community Property Act (AS 34.77) lets spouses opt in. Under AS 34.77.030, property of spouses is community property only to the extent a community property agreement or community property trust says so, each spouse then holds a present undivided one-half interest, and community property moved into a trust keeps its character.
The sponsor statement for Senate Bill 11 (32nd Legislature) describes the point: Alaska residents can sign community property agreements, residents and nonresidents alike can create Alaska community property trusts, and community property receives favorable treatment when a spouse dies and the property is later sold. Whether that helps a couple who plan to exchange rather than sell is a planning question for an Alaska attorney and a CPA.
The title-holding owner, whether an individual, a community property trust or an LLC, must generally be the same on both sides of the exchange, so decide on any community property election before the relinquished sale closes rather than during the exchange period.
The state keeps the mineral estate under land it sold: read the deed before you exchange
Under AS 38.05.125, every contract, lease or deed by which the State of Alaska disposes of state land reserves to the state 'all oils, gases, coal, ores, minerals, fissionable materials, geothermal resources, and fossils', together with the right to enter the surface to explore for and develop them. A parcel that traces its title to a state land sale is a surface estate only.
That matters in an exchange because the relinquished and replacement descriptions should match what is actually owned. A seller cannot exchange mineral rights the state never conveyed, and a buyer of Alaska replacement land should expect the state's reservation and access rights in the title commitment.
Replacement property
Exchanging Alaska property into a DST: the tax follows the DST's properties, not the investor
An Alaskan who trades Alaska property for an interest in a Delaware Statutory Trust leaves a state with no income tax and, in most cases, acquires an interest in property located in states that have one. States generally tax the rent a property earns inside their borders, so the investor may need to file nonresident returns in those states for the first time, even though Alaska itself asks nothing.
The same logic applies at exit. When a DST's property is eventually sold and the deferred gain is recognized, the state where that property sits can generally tax its share of the gain; Alaska will not tax any of it. Sponsors typically provide state-by-state income figures, and a CPA can tell you which states require a return and whether any withhold on distributions to nonresidents.
Properties in states without an income tax keep the position closest to what an Alaskan is used to. That is worth weighing when comparing offerings on the investment types page, alongside the usual questions of sponsor, sector and leverage.
Breakwater Exchange works with vetted national sponsors, brings 20-plus years and DST transactions that exceed a billion dollars, and is licensed to operate in Alaska and the other 49 states within a regulated broker-dealer framework; Alaskans use the website form to get in touch. The state-sourcing questions above belong with your CPA and, for corporate sellers, the Alaska Department of Revenue Tax Division.
Questions investors ask about 1031 exchanges in Alaska
Does Alaska tax the gain if my 1031 exchange fails?
Not for an individual, trust or partnership: Alaska has no personal income tax, so a failed exchange costs federal tax only. A C corporation would owe Alaska corporate income tax at up to 9.4 percent on the recognized gain.
Is there any Alaska withholding when a nonresident sells Alaska real estate?
No. Alaska has no income tax withholding on real estate sales, and no form for the buyer or intermediary to file with the state.
Can my borough add a real estate transfer tax before I close?
No. Chapter 28 SLA 2024 (SB 179) prohibits boroughs, cities and the state from levying a sales or use tax on the transfer of real property; only an ordinance already in place before the law took effect survives.
Why would an Alaskan with no state income tax need to think about state taxes in a DST?
Because most DSTs own property outside Alaska, and those states generally tax rental income and gain where the property is located. An Alaskan may file nonresident returns there; choosing DSTs with property in no-income-tax states avoids that.
Does opting into Alaska community property affect who signs the exchange documents?
It can. Under AS 34.77.030 each spouse holds a present undivided one-half interest in community property, and community property transferred to a trust keeps that character, so the exchange documents should reflect the same ownership on both sides; settle the election before the sale closes.
Sources
The rules above were checked against these publications on September 18, 2026. Rates and forms change; confirm the current version with your CPA and the Alaska tax agency before you close. This page is general information, not tax or legal advice.
- Tax Foundation, 2026 Alaska Tax Rates, Collections, and Burdens
- Alaska Department of Revenue Tax Division, Corporate Income Tax
- Alaska Legislature, SB 179 (33rd Legislature) enrolled text
- Alaska Legislature, SB 179 bill status (signed into law 8/13/2024, Chapter 28 SLA 24)
- Alaska Statutes §29.45.090, municipal tax limitation
- Alaska Statutes §34.77.030, classification of property of spouses
- Alaska Legislature, sponsor statement for SB 11 (community property trusts)
- Alaska Statutes §38.05.125, reservation of mineral rights in state land