Hawaii Retirement

Persons who decide to retire in Hawaii will face some additional taxation on both regular income and investments. Both residents and nonresidents are subject to the State Income Tax in the Aloha state.

Any nonresident who earns any income while in Hawaii is required to file a state income tax return. This would include retired persons who live part time in the islands.

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Hawaii Income Taxes

Under current Hawaii law any retirement income from an out of state source is subject to the state income tax. This includes pensions, Social Security, and other income that exceeds the exemptions set by the state code. The personal tax exemption is currently $1,040 for a single individual and $2,080 for a married couple. The exemption for married couples filing jointly is doubled. There currently is no exemption for seniors in Hawaii. Disabled persons may claim a $7,000 tax exemption in Hawaii.

Even though there are few exemptions to the personal income tax the rate is still quite low. The lowest rate is 1.4% and the highest 8.25%. Hawaii residents should realize that the high income tax rate begins at $40,000. There is no deduction for federal income tax in Hawaii.

Hawaii's Department of Taxation requires individuals to file a separate tax form. It is possible to file a simple tax return just to get the standard deduction in Hawaii. State income tax forms and other basic information is available from the Hawaii Department of Taxation.

Hawaii Capital Gains Tax

Persons with investments should be aware that Hawaii has a 7.25% capital gains tax on top of the income tax. This means that any gains in investment income will be subject to an additional 7.25% tax. Therefore it would be a good idea to make retirement investments outside of Hawaii.

No Sales Tax in the Aloha State

Hawaii does not have a sales tax, instead it has a General Excise Tax on all business activities. Anybody who engages in any sort of business in the islands would be required to pay this tax. This would include small businesses and people who work from home.

Property Taxes in Hawaii

As in most states, property taxes in Hawaii are set by the county governments. Each of the large islands in Hawaii is a county so the property tax rates will be different on each island.

The current tax rate for residential property in Hawaii County (the Big Island) is $9.10 per $1,000 of value. The rate for apartments is slightly higher at $9.85 per $1,000 of value.

The tax rate for homeowners in Hawaii County is currently lower than for owners of income property. Homeowners in Hawaii County pay $5.55 per $1,000 of property value. A real property tax credit is available for some residents of Hawaii. To receive it a person will have to contact their county government.

High Cost of Living in Hawaii

Some thing that perspective residents need to realize is that the cost of living in Hawaii is higher than in other states. The prices of everyday items including groceries and gasoline are much higher in Hawaii because everything has to be brought in by ship.

Some costs of living are lower in Hawaii, though. For example, due to tropical climate there are no heating costs. Real estate costs are still fairly low in some parts of Hawaii, including the big island. Persons thinking of retiring to Hawaii need to take the cost of living into account before making the move because generally speaking it will be greater than in other states.

Capital: Honolulu
Cost of Living Rank: #50
Sales Tax: 4.0%
Income Tax: 1.4% - 11.0%
State Website: http://www.hawaii.gov