State-by-State Guide to Taxes on Retirees
Tool | December 2020

Hawaii State Tax Guide for Retirees

State tax rates and rules for income, sales, property, estate, and other taxes that impact retirees.

Hawaii

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The Bottom Line
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Most Tax-Friendly

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 at rates up to 11%.

The property tax situation is unusual: The statewide median tax rate is 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.

Sales taxes are low in Hawaii, too. The average combined state and local rate is only 4.44%, which is the seventh-lowest in the U.S. (but purchases of groceries and clothing are taxed).

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)

Taxation of Social Security Benefits

Social Security benefits are not taxed by the state.

Tax Breaks 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.

Sales Tax

4% state levy. Localities can add as much as 0.5%, but the average combined rate is only 4.44%, according to the Tax Foundation.

Groceries: Taxable
Clothing: Taxable
Motor Vehicles: Taxable
Prescription Drugs: Exempt

Real Property Taxes

Property tax breaks for seniors vary by county in Hawaii. In Honolulu County, for example, homeowners 65 or older get a larger home exemption of $140,000 (as opposed to $100,000 for younger homeowners). Low-income seniors age 75 and older may qualify for even larger exemption amounts, ranging from $140,000 to $200,000, depending on their age.

Annual Car Taxes and Fees

An annual vehicle registration fee based on the car's weight and usage is imposed.

Estate and Inheritance Taxes

Hawaii imposes an estate tax on estates worth $5.49 million or more. Tax rates range from 10% to 20%.

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