State-by-State Guide to Taxes on Retirees
Tool | November 2019

State-by-State Guide to Taxes on Retirees


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The Bottom Line
Flag of Hawaii


The Aloha State is known for its high cost of living, but it can be a tax paradise for retirees. It exempts Social Security benefits as well as most pension income from state income taxes. But if you have other sources of income, Hawaii will tax that income up at rates up to 11%.

The property tax situation is unusual: Tax rates are the lowest in the country, and seniors can also get big-dollar exemptions from property taxes (these vary by county). But keep in mind that Hawaiian property values are sky-high.

State Sales Tax

4% state levy. Hawaii employs a General Excise Tax that applies to a wide range of goods and services; only prescription drugs and prostheses are exempt, and many business-to-business transactions are also taxable. Oahu has a county surcharge tax of 0.5% to pay for mass transit, taking the state’s average combined rate to 4.41%. To ease the burden on low-income residents, the state provides a credit. The maximum payout is $110 per taxpayer.

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 $200,000 for married couples filing separately and individual filers)

Effective tax rate: 5.96% for single filers, 7.13% for joint filers.

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Income from private, government, and military retirement plans is fully exempt if the employee did not contribute to the plan (e.g., a traditional pension). If both the employee and employer contributed to the plan (e.g., a 401(k) plan with an employer matching program), the exclusion applies only to amounts attributable to employer contributions.

Tier 1 Railroad Retirement benefits are also exempt.

Property Taxes

In Hawaii, residents pay an average of $304 in taxes per $100,000 of assessed home value.

Tax breaks for seniors: These vary by county; in Honolulu County, 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.

Vehicle Taxes

State excise tax is due on vehicle sales. Vehicles are also taxed by weight at registration. (Example: A 4,000-pound vehicle registered in Honolulu County would owe $200 to the county and $75 to the state.)

Inheritance and Estate Taxes

Hawaii decided not to follow the big jump in the estate-tax exemption under the new federal tax law and set its own instead: $5.49 million, the same as for 2017. Tax rates range from 10% to 15.7%.