Tool | October 2015
State-by-State Guide to Taxes on Retirees
State Sales Tax
4%. Hawaii employs a General Excise Tax that applies to a wide range of goods and services. Since it's levied on the vendor rather than the buyer, the actual rate consumers pay is closer to 4.2%. Only prescription drugs and prostheses are exempt. Oahu has a county surcharge tax of 0.5% to pay for a mass transit system.
Income Tax Range
Low: 1.4% (on taxable income up to $4,800 for married couples filing jointly; on up to $2,400 for married couples filing separately and individual filers)
High: 11% (on taxable income over $400,000 for married couples filing jointly and surviving spouses; on over $300,000 for married couples filing separately and individual filers)
Benefits are not taxed.
Exemptions for Other Retirement Income
First-tier Railroad Retirement benefits and military, federal, state and local pensions are exempt. All out-of-state government pensions are exempt. Also, private employer-funded pension plans that employees did not contribute to are exempt. Distributions from private, employer-funded pension plans received upon retirement are partially taxed by the state if the employee contributed to the pension plan. Employee earnings are taxed under these plans, but employee contributions are exempt.
IRA distributions are fully taxed if funded by an individual, rather than the employer through a rollover from an employer plan.
401(k)s and Other Defined-Contribution Employer Retirement Plans
Distributions are taxed. If the employer provided matching contributions, however, part of the plan is considered to be employer-funded and not taxed.
Private employer-funded pension plans that employees did not contribute to are exempt.
First-tier Railroad Retirement benefits and military, federal, state and local pensions are exempt. All out-of-state government pensions are exempt.
The median property tax on the state's median home value of $500,000 is $1,389, according to the Tax Foundation.
Tax breaks for seniors: These vary by county. In Honolulu, for example, homeowners 65 or older get a larger home exemption of $120,000. Low-income seniors age 75 and older may qualify for even larger exemption amounts, ranging from $140,000 to $200,000, depending on age.
The estate and transfer tax is imposed on Hawaii property owners with estates worth $3.6 million or more, and tax rates range from less than 1% to 16%. There is no inheritance tax.
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