AbstractPermafrost thaw is typically measured with active layer thickness, or the maximum seasonal thaw measured from the ground surface. However, previous work has shown that this measurement alone fails to account for ground subsidence and therefore underestimates permafrost thaw. To determine the impact of subsidence on observed permafrost thaw and thawed soil carbon stocks, we quantified subsidence using high‐accuracy GPS and identified its environmental drivers in a permafrost warming experiment near the southern limit of permafrost in Alaska. With permafrost temperatures near 0°C, 10.8 cm of subsidence was observed in control plots over 9 years. Experimental air and soil warming increased subsidence by five times and created inundated microsites. Across treatments, ice and soil loss drove 85–91% and 9–15% of subsidence, respectively. Accounting for subsidence, permafrost thawed between 19% (control) and 49% (warming) deeper than active layer thickness indicated, and the amount of newly thawed carbon within the active layer was between 37% (control) and 113% (warming) greater. As additional carbon thaws as the active layer deepens, carbon fluxes to the atmosphere and lateral transport of carbon in groundwater could increase. The magnitude of this impact is uncertain at the landscape scale, though, due to limited subsidence measurements. Therefore, to determine the full extent of permafrost thaw across the circumpolar region and its feedback on the carbon cycle, it is necessary to quantify subsidence more broadly across the circumpolar region.