Retirement Taxes in Hawaii (2025)
Less tax-friendly. Income tax: graduated, 1.4%–11%. Social Security: not taxed. Retirement account withdrawals: your own 401(k) deferrals and IRA withdrawals are taxable.
Seeded with roughly 15% — about 10% effective federal plus an estimated 4.5% Hawaii tax on retirement withdrawals. Change it to your own rate.
What Hawaii taxes in retirement
| State income tax | Graduated, 1.4%–11% |
|---|---|
| Social Security | Not taxed |
| 401(k) and IRA withdrawals | Your own 401(k) deferrals and IRA withdrawals are taxable |
| Pensions | Employer-funded pension income is exempt |
| Estate or inheritance tax | Estate tax |
| Average combined sales tax | 4.5% |
| Average effective property tax | 0.26% of home value |
Hawaii splits retirement income precisely down the middle: the part your employer funded is exempt, the part you funded is not. Property taxes are the lowest in the nation, which softens the highest cost of living in the nation.
What the state tax actually costs you
Take a $500,000 balance and withdraw $2,500 a month, rising with inflation. At an effective federal rate of 10% alone, the money lasts about 18.8 years. Add Hawaii's estimated 4.5% and it lasts about 17.4 years — a difference of roughly 1.4 years.
That is the honest scale of it. State income tax is real money, but for most retirees it changes the answer by months or a couple of years, not decades — and it is usually smaller than the effect of housing costs, which is why a move made purely for income tax often fails to pay for itself.
The taxes that are not income tax
Retirees feel sales and property tax more than working-age households do, because a larger share of a fixed income goes on spending and on staying in a house that is already owned. Hawaii charges an average combined sales tax of about 4.5% and levies an average effective property tax of about 0.26% of a home's value, which is well below the national average.
On death: estate tax. State thresholds are frequently far below the federal exemption, so an estate that owes nothing federally can still owe here — a house plus a retirement portfolio is often enough to cross the line.
Should you move for the tax?
Compare the whole burden rather than one line of it. States without an income tax raise the money elsewhere — Texas and New Hampshire through property tax, Tennessee and Washington through sales tax — so the saving is often smaller than the headline suggests. Run your own numbers in the calculator above, then look at what the same house costs in each state, what insurance costs, and how far you would be from family and from the specialists you already use.
Establishing residency is also a formal exercise, not a preference: high-tax states audit departing retirees on days present, driver's licence, voter registration, where the primary home is, and where a doctor and a dentist are. Half-measures lose.
Frequently asked questions
Does Hawaii tax Social Security benefits?
Not taxed. Your benefit may still be taxable federally once provisional income crosses the limits — see is Social Security taxable.
Does Hawaii tax 401(k) and IRA withdrawals?
Your own 401(k) deferrals and IRA withdrawals are taxable. Pensions are treated separately — Employer-funded pension income is exempt.
Is Hawaii a good state to retire in for taxes?
Less tax-friendly on income tax. We estimate roughly 4.5% effective state tax on $40,000 a year of withdrawals for a 65-year-old single filer. Average combined sales tax is about 4.5% and effective property tax about 0.26% of home value. Estate or inheritance tax: estate tax.
Does Hawaii have an estate or inheritance tax?
Estate tax. This is separate from the federal estate tax and often has a much lower threshold, so it can reach estates that owe nothing federally.
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SavingsLast calculators are educational estimates. They assume a constant average return and steady inflation; real markets are volatile and sequence-of-returns risk can shorten how long money lasts. Nothing here is financial, investment, tax, or legal advice. Consult a qualified professional before making decisions.
Reviewed for the 2025 tax year. Several states are part-way through scheduled rate cuts or phase-outs, and thresholds are often indexed annually — confirm current figures with the Hawaii tax agency (listed at taxadmin.org) or a tax professional before acting. The effective-rate estimate is a planning figure, not a filing figure.