Hawaii does have state income tax, and it applies to most residents and workers
Hawaii collects state income tax on wages, self-employment income, interest, dividends, and other earnings. The tax rate ranges from 1.4% to 11%, depending on your income bracket. Unlike some states that exempt certain types of income, Hawaii taxes most forms of earnings that federal income tax covers.
If you work in Hawaii or live there year-round, you will owe state income tax on money you earn. The state uses a progressive tax system, meaning higher earners pay a higher percentage. A single person earning $25,000 per year pays a different rate than someone earning $100,000.
Hawaii also taxes income earned outside the state if you are a resident. If you moved to Hawaii from another state and still receive retirement income, investment income, or a pension from your former state, Hawaii will tax that money too.
Key Takeaways
- Hawaii's income tax rates range from 1.4% to 11% depending on your income level, with higher earners paying the higher percentage.
- The state taxes wages, self-employment income, pensions, retirement account withdrawals, interest, and dividends for residents and people who work in Hawaii.
- Non-residents who work in Hawaii only pay tax on income earned within the state, not on income from other sources or states.
- Hawaii does not have a separate sales tax, but it does charge a general excise tax of 4% on most goods and services, which affects your overall cost of living.
Hawaii's income tax brackets and rates for 2024
Hawaii uses eight tax brackets for single filers and eight for married couples filing jointly. The lowest bracket starts at 1.4% on income under a certain threshold, and the rate increases as income rises. The highest rate of 11% applies to income above a set amount that changes each year.
The exact dollar amounts for each bracket adjust annually for inflation. For the most current brackets, you will need to check the Hawaii Department of Taxation website or your tax forms for the year you are filing. Tax software and the state's forms will show you which bracket applies to your income.
Hawaii also allows a standard deduction, which reduces the income amount you actually pay tax on. The standard deduction amount varies by filing status and age. If you are 65 or older, you may receive a larger deduction.
Who has to pay Hawaii income tax
You must pay Hawaii income tax if you are a resident of the state, regardless of where your income comes from. The state defines a resident as someone who lives in Hawaii for the entire tax year or maintains a permanent home there. If you moved to Hawaii partway through the year, you may be considered a part-year resident and owe tax only on income earned after you arrived.
Non-residents who work in Hawaii pay tax only on income earned within the state. If you live in another state but work remotely for a Hawaii-based company, you may not owe Hawaii tax depending on where you physically perform the work. If you are self-employed and operate a business in Hawaii, you owe tax on that business income even if you live elsewhere.
Military personnel stationed in Hawaii may have different rules. Active-duty service members are often exempt from state income tax on military pay, though they may still owe tax on other income sources. Check with a military tax specialist or the Hawaii Department of Taxation if you are active duty.
Types of income Hawaii taxes
Hawaii taxes wages and salaries from employment. It also taxes self-employment income if you own a business or work as an independent contractor. Retirement income, including distributions from 401(k) accounts, IRAs, and pensions, is subject to Hawaii income tax.
Interest income from savings accounts and bonds is taxed. Dividend income from stocks and mutual funds is taxed. Capital gains — the profit you make when you sell an investment for more than you paid — are taxed as ordinary income in Hawaii. Rental income from property you own is taxed.
Some types of income receive special treatment. Social Security benefits are generally not taxed by Hawaii. Certain military benefits and veterans' pensions may be exempt. If you receive income from sources outside Hawaii and you are a resident, that income is also subject to Hawaii tax.
How to file Hawaii state income tax
You file Hawaii state income tax using Form N-11 (for single filers) or Form N-11 (for married couples filing jointly). These forms are available on the Hawaii Department of Taxation website. You can file by mail, electronically through approved tax software, or through the state's online filing system.
The federal tax deadline — typically April 15 — is also the Hawaii state tax deadline. If you file for a federal extension, you automatically receive an extension for Hawaii taxes as well. However, any taxes owed are still due by April 15; an extension only extends the time to file, not the time to pay.
You will need your Social Security number, income information from your employer (W-2 form) or from your own records if self-employed, and documentation of any deductions or credits you claim. If you paid Hawaii taxes through withholding from your paycheck, you will need your pay stubs to verify the amount withheld.
Hawaii's general excise tax and how it affects your costs
Hawaii does not have a sales tax like most other states. Instead, it charges a general excise tax of 4% on most goods and services. This tax is built into the price you pay at checkout for groceries, clothing, restaurant meals, and most other purchases. Some counties add an additional 0.5% local tax.
The general excise tax applies differently depending on what you buy. Groceries are taxed at 4%. Restaurant meals are taxed at 4%. Gasoline is taxed at 4%. Some services, like haircuts or car repairs, are also taxed at 4%. A few items receive different treatment, such as certain medical equipment or agricultural products.
Because Hawaii has no sales tax but does have income tax, your overall tax burden depends on how much you earn versus how much you spend. A high earner who spends little pays more in income tax. A lower earner who spends most of their income pays more in general excise tax.
Tax credits and deductions available to Hawaii residents
Hawaii offers several tax credits that can reduce the amount of tax you owe. The Earned Income Tax Credit (EITC) is available to lower-income workers and is often larger than the federal credit. Hawaii also offers a Child and Dependent Care Credit, a Dependent Exemption Credit, and credits for certain types of education expenses.
If you are over 59½ and receive retirement income, you may be able to exclude some of that income from taxation under Hawaii's retirement income exclusion. The amount you can exclude depends on your total income and filing status. This exclusion can significantly reduce taxes for retirees.
You can deduct certain expenses if you are self-employed, including business supplies, equipment, and a portion of your home office if you use it exclusively for business. If you own rental property in Hawaii, you can deduct mortgage interest, property taxes, insurance, repairs, and depreciation.
Frequently Asked Questions
Do I have to pay Hawaii income tax if I just moved there?
If you moved to Hawaii partway through the year, you are considered a part-year resident. You owe Hawaii tax only on income you earned after you arrived in the state. Income earned before you moved is not subject to Hawaii tax. You will file a part-year resident return and report only the income earned during the months you lived in Hawaii.
What happens if I work in Hawaii but live in another state?
You owe Hawaii tax only on income you earned in Hawaii. If you live in another state and work remotely for a Hawaii company but do not physically work in Hawaii, you may not owe Hawaii tax — it depends on where your employer is located and where you actually perform the work. Contact the Hawaii Department of Taxation or a tax professional to determine your obligation.
Is Social Security taxed in Hawaii?
No, Hawaii does not tax Social Security benefits. However, if you have other income sources like wages, pensions, or investment income, those are taxed. Your total income from all sources determines your tax bracket, but the Social Security portion itself is not taxed by the state.
Can I deduct federal income tax from my Hawaii state taxes?
No, Hawaii does not allow you to deduct federal income tax paid. However, you can deduct state income tax you paid to other states if you are a part-year resident or if you earned income in multiple states. You cannot deduct Hawaii state income tax from your Hawaii return.
What if I did not pay enough tax through withholding during the year?
If you owe money when you file, you can pay it with your return or set up a payment plan with the Hawaii Department of Taxation. If you owe a large amount, you may want to adjust your withholding for the following year so less tax is owed at filing time. Self-employed people can make quarterly estimated tax payments to avoid owing a large amount at year-end.