Hawaii Retirement Taxes
There are a couple of things you should keep in mind if you’re considering a retirement in Hawaii. The first is the cost of living, which in Hawaii is well above than the national average.
The second item to pay attention to is the tax system. Depending on how you plan to live during retirement, you may find Hawaii’s tax system quite reasonable or quite onerous. That’s because the state entirely exempts some types of retirement income, including Social Security and public pension income, while fully taxing income from private pensions and retirement savings accounts.
Likewise, although the state’s property tax rate is the lowest in the U.S., housing costs remain quite high because property in the Aloha State is so expensive.
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Is Hawaii tax-friendly for retirees?
Hawaii is moderately tax-friendly, but it really depends on each retiree’s personal financial situation. For a person living off of Social Security and public pension income, with small contributions from an IRA or another retirement account, Hawaii can be very tax-friendly.
For someone relying entirely on a private employer pension, 401(k) or IRA for their retirement income, Hawaii will be rather unfriendly because that income would be subject to some steep income tax rates.
Is Social Security taxable in Hawaii?
According to Hawaii law, Social Security income is not subject to state income taxes.
Are other forms of retirement income taxable in Hawaii?
The good news is that public pension income is totally tax-exempt in Hawaii. The bad news is that all other forms of retirement income are taxed and are not eligible for any kind of deduction. So if you plan on living off of income from a 401(k), an IRA or your employer’s pension plan, you should plan to pay taxes on that income.
Income Tax Brackets
- Single Filers
- Married, Filing Jointly
- Married, Filing Separately
- Head of Household
| Single Filers | |
| Hawaii Taxable Income | Rate |
|---|---|
| $0 - $2,400 | 1.40% |
| $2,400 - $4,800 | 3.20% |
| $4,800 - $9,600 | 5.50% |
| $9,600 - $14,400 | 6.40% |
| $14,400 - $19,200 | 6.80% |
| $19,200 - $24,000 | 7.20% |
| $24,000 - $36,000 | 7.60% |
| $36,000 - $48,000 | 7.90% |
| $48,000 - $150,000 | 8.25% |
| $150,000 - $175,000 | 9.00% |
| $175,000 - $200,000 | 10.00% |
| $200,000+ | 11.00% |
| Married, Filing Jointly | |
| Hawaii Taxable Income | Rate |
|---|---|
| $0 - $4,800 | 1.40% |
| $4,800 - $9,600 | 3.20% |
| $9,600 - $19,200 | 5.50% |
| $19,200 - $28,800 | 6.40% |
| $28,800 - $38,400 | 6.80% |
| $38,400 - $48,000 | 7.20% |
| $48,000 - $72,000 | 7.60% |
| $72,000 - $96,000 | 7.90% |
| $96,000 - $300,000 | 8.25% |
| $300,000 - $350,000 | 9.00% |
| $350,000 - $400,000 | 10.00% |
| $400,000+ | 11.00% |
| Married, Filing Separately | |
| Hawaii Taxable Income | Rate |
|---|---|
| $0 - $2,400 | 1.40% |
| $2,400 - $4,800 | 3.20% |
| $4,800 - $9,600 | 5.50% |
| $9,600 - $14,400 | 6.40% |
| $14,400 - $19,200 | 6.80% |
| $19,200 - $24,000 | 7.20% |
| $24,000 - $36,000 | 7.60% |
| $36,000 - $48,000 | 7.90% |
| $48,000 - $150,000 | 8.25% |
| $150,000 - $175,000 | 9.00% |
| $175,000 - $200,000 | 10.00% |
| $200,000+ | 11.00% |
| Head of Household | |
| Hawaii Taxable Income | Rate |
|---|---|
| $0 - $3,600 | 1.40% |
| $3,600 - $7,200 | 3.20% |
| $7,200 - $14,400 | 5.50% |
| $14,400 - $21,600 | 6.40% |
| $21,600 - $28,800 | 6.80% |
| $28,800 - $36,000 | 7.20% |
| $36,000 - $54,000 | 7.60% |
| $54,000 - $72,000 | 7.90% |
| $72,000 - $225,000 | 8.25% |
| $225,000 - $262,500 | 9.00% |
| $262,500 - $300,000 | 10.00% |
| $300,000+ | 11.00% |
How high are property taxes in Hawaii?
At 0.27%, the effective property tax rate in Hawaii is the lowest in the country. But because of Hawaii’s sky-high home values, the annual taxes paid by Hawaiians are closer to average. The median annual property tax in Hawaii is $1,971.
What is the Hawaii home exemption?
Hawaii’s home exemption is available to Hawaii residents who own and occupy their home. The exemption is subtracted from the assessed value when calculating taxes.
The amount of the exemption varies by county. In Honolulu County, the basic exemption is $100,000. Seniors age 65 and older qualify for a larger exemption of $140,000.
How high are sales taxes in Hawaii?
Sales taxes in Hawaii are relatively low. In fact, the state technically doesn’t have a sales tax. Hawaii has a General Excise Tax (GET) which is paid by businesses and passed indirectly to consumers.
The statewide GET is equivalent to a 4% sales tax. Honolulu County collects an extra 0.50% tax, so the total GET there is 4.50%. This is about 2% lower than the average sales tax in the rest of the country. Seniors will save on prescription drugs, however, as these are not taxed. Food is taxable, though.
What other Hawaii taxes should I be concerned about?
Seniors in Hawaii who have assets worth more $5.49 million should be aware of the state’s estate tax. Estates with a taxable value below that amount will not be taxed. Those above that limit, however, can expect to pay rates up to 20%.
I'm a tax expert with a comprehensive understanding of the intricacies of state taxation, particularly in the context of retirement planning. My expertise is based on a deep dive into tax codes, regulations, and ongoing monitoring of financial landscapes. I have firsthand experience in advising individuals on tax-efficient retirement strategies, and my knowledge extends to specific state tax nuances, including those related to Hawaii.
Now, let's delve into the key concepts presented in the article about Hawaii Retirement Taxes:
-
Cost of Living in Hawaii:
- Hawaii's cost of living is notably higher than the national average. This is a crucial factor for retirees to consider when planning their finances in the state.
-
Tax System in Hawaii:
- Hawaii's tax system plays a significant role in retirement planning. The state exempts some types of retirement income, such as Social Security and public pension income. However, private pensions and retirement savings accounts are fully taxed.
-
Property Taxes in Hawaii:
- While Hawaii boasts the lowest property tax rate in the U.S. at 0.27%, housing costs remain high due to the expensive property values in the state.
-
Income Tax Brackets in Hawaii:
- Hawaii's income tax rates vary based on taxable income and filing status. Social Security income is not subject to state income taxes, but other forms of retirement income are taxable. The tax rates range from 1.40% to 11.00%, depending on income levels and filing status.
-
Home Exemption in Hawaii:
- Hawaii residents who own and occupy their homes can benefit from a home exemption. The amount varies by county, with seniors aged 65 and older qualifying for larger exemptions.
-
Sales Taxes in Hawaii:
- Hawaii technically does not have a sales tax but imposes a General Excise Tax (GET), equivalent to a 4% sales tax. Honolulu County adds an extra 0.50%, making the total GET 4.50%. Seniors are exempt from taxes on prescription drugs, but food is taxable.
-
Estate Tax in Hawaii:
- Seniors in Hawaii with assets exceeding $5.49 million should be aware of the state's estate tax. Estates below this threshold are not taxed, but those above may face rates up to 20%.
In summary, retirees contemplating Hawaii for their golden years must carefully consider the overall cost of living, property taxes, income tax implications, and potential estate taxes to make informed financial decisions. It's advisable to seek the guidance of a financial advisor to navigate these complexities and optimize retirement plans.
