How Hawaii taxes retirement income
Hawaii does not tax Social Security benefits. Pension income is also exempt. Social Security and tier-1 Railroad Retirement Act benefits are exempt from Hawaii income tax (HRS §235-2.3(b)(3)). Qualifying employer-funded pensions, i.e., non-elective, employer-funded retirement plans, are excluded from gross/taxable income under HRS §235-7(a)(2)-(3). 401(k) plans, traditional and Roth IRAs, SARSEPs, section 403(b) elective deferrals, and other plans funded via an employee's own elective contributions are NOT eligible for the pension exclusion, so distributions from them are generally taxable; the exception is any portion of a distribution attributable to true employer matching/non-elective contributions (excluded via a computed 'exclusion ratio') or to previously-taxed (disallowed/nondeductible) contributions, which is not taxed again.
Retirement income tax in Hawaii, at a glance
| Income type | Taxed by Hawaii? |
|---|---|
| Social Security | No |
| Pensions | No |
| 401(k) / IRA withdrawals | Yes |
| Estate / inheritance tax | Estate tax (exemption $5,490,000) |
| Avg. property tax rate | 0.29% of home value |
Does Hawaii tax Social Security benefits?
No. Hawaii does not tax Social Security benefits.
Does Hawaii tax pensions and 401(k) or IRA withdrawals?
Hawaii exempts pension income, though other retirement withdrawals may still be taxed. Social Security and tier-1 Railroad Retirement Act benefits are exempt from Hawaii income tax (HRS §235-2.3(b)(3)). Qualifying employer-funded pensions, i.e., non-elective, employer-funded retirement plans, are excluded from gross/taxable income under HRS §235-7(a)(2)-(3). 401(k) plans, traditional and Roth IRAs, SARSEPs, section 403(b) elective deferrals, and other plans funded via an employee's own elective contributions are NOT eligible for the pension exclusion, so distributions from them are generally taxable; the exception is any portion of a distribution attributable to true employer matching/non-elective contributions (excluded via a computed 'exclusion ratio') or to previously-taxed (disallowed/nondeductible) contributions, which is not taxed again.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- Hawaii taxation of retirement income (Social Security, pensions, 401(k)/IRA): Hawaii Department of Revenue / Taxation.
- Hawaii estate / inheritance tax: Hawaii tax authority.