Hawaii taxes none of your Social Security and exempts pensions your employer paid for, but it taxes the part you chose to fund yourself.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf That means a non-contributory pension comes through tax-free, while the 401(k) deferrals and the IRA money you funded yourself are taxed on Hawaii's graduated scale, which for 2025 runs from 1.40 percent up to a top rate of 11.00 percent that a single filer does not reach until taxable income passes $325,000. Hawaii retirement income tax turns on none of the usual things: not your age, not your account type, only who put the money in and whether you had a choice about it. This guide walks through how the state treats each kind of income, where that line falls, and how it factors into paying for care.
The short version: Hawaii taxes the retirement money you chose to contribute, not the money your employer contributed.
Hawaii Retirement Income Tax at a Glance
Hawaii's rule turns on a question most states ignore: who funded the retirement income?
Social Security is exempt, and so is first-tier Railroad Retirement. Hawaii does not tax Social Security benefits, and first-tier Railroad Retirement benefits are exempt from the state's net income tax on the same footing.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf Not a dollar of either monthly check is touched by the state.
Employer-funded pensions are exempt. A pension where you did not contribute, the non-contributory kind common among traditional public and private defined-benefit plans, is exempt from Hawaii tax.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf
The contributions you elected to make are taxed. Retirement income traceable to contributions you chose to make, money you could have taken as cash instead, is taxable.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf That covers your 401(k) elective deferrals, distributions from an IRA you funded yourself, and the share of a pension you elected to pay for. An IRA you filled by rolling over an employer plan is different: it is treated as a continuation of that plan, so the employer-funded money keeps its exemption.
The Hawaii Department of Taxation sets out this contribution-source rule in Tax Information Release 96-5, the document that draws the line between exempt and taxable retirement income.
The Rule Behind Hawaii Retirement Income Tax: Who Paid In?
Most states sort retirement income by what kind of account it sits in: pension, IRA, 401(k). Hawaii sorts it by who funded it. Get that distinction right and the rest follows.
The exempt side is employer-funded income. If your former employer paid the entire cost of your pension and you contributed nothing, that pension is non-contributory, and Hawaii exempts it.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf Many traditional defined-benefit plans, both public and private, work this way: the employer funds the promised benefit, and the worker pays in nothing directly. That income comes through free of Hawaii tax.
The taxed side is employee-funded income. Money you chose to set aside yourself, and the income it later produces, is taxable.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf The test Hawaii applies is the choice: the state treats a plan as your own investment when you could have taken that money in cash instead of putting it in.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf The clearest examples are 401(k) elective deferrals, the pre-tax money you chose to route from your paycheck into the plan, and distributions from a traditional IRA you funded. A 401(k) is not all-or-nothing, though: where the employer also made matching or nonelective contributions, that employer-funded share stays excluded, and an exclusion ratio decides how much of each distribution comes out tax-free.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf When a pension is contributory, meaning you paid in part of the cost, the share traceable to contributions you elected to make is taxable too.
One case the cash-or-defer test does not answer on its face: contributions you were required to make as a condition of the job, with no option to take the money in cash. Those are not elective, so the Department of Taxation's rule does not label them taxable the way it labels a 401(k) deferral. If that describes your pension, do not assume either answer. Ask the Department of Taxation or a tax preparer how your specific plan is treated before you budget around it.
So the question that decides your Hawaii tax bill is not "Is this a pension or a 401(k)?" It is "Did my employer pay for this, or did I choose to put it in?"
Sorting Your Own Income
This is the step that trips people up, so work through your sources one at a time.
- A pension you never paid into. Non-contributory, so exempt. Many government and traditional private pensions land here.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf
- A pension you paid part of. Contributory, so the portion traceable to contributions you elected to make is taxable, while the employer-funded portion stays exempt. If your contributions were mandatory rather than chosen, that is the unsettled case above; ask before you assume.
- A 401(k). The elective deferrals were yours, so that share of your distributions is taxable. If your employer also made matching or nonelective contributions, an exclusion ratio keeps that employer-funded share exempt.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf
- A traditional IRA you funded yourself. Your own money went in, so withdrawals are taxable.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf
- A rollover IRA. An IRA funded by a rollover from an employer plan is treated as a continuation of that plan, so an employer-funded pension you rolled into an IRA keeps its Hawaii exemption.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf
If you are not sure whether your pension was contributory, your plan administrator or your benefit statements will say how much, if anything, you paid in, and whether those contributions were required of you or elective. Ask the administrator for the Form 1099-R breakdown of your cost basis, the after-tax money you contributed; that number is what determines the taxable share.
What Hawaii Retirement Income Tax Costs You
What Hawaii taxes is the slice of your retirement income you funded yourself: your 401(k) elective deferrals and distributions from an IRA you funded.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf That slice is subject to the state's regular graduated income tax; the exempt slice never enters the calculation at all. For tax year 2025, that schedule starts at 1.40 percent and tops out at 11.00 percent, and the top rate reaches only taxable income above $325,000 for a single filer or someone married filing separately, above $650,000 for a married couple filing jointly or a qualifying surviving spouse, and above $487,500 for an unmarried head of household.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf Most retirees sit far below that; the Department of Taxation sends filers with taxable income under $100,000 to its tax table rather than the rate schedule. Hawaii publishes the current rates and income thresholds each year in the Form N-11 resident return instructions from the state Department of Taxation, which is where to check exactly what applies to your income.
What this means in practice:
- If you live mostly on Social Security and a non-contributory pension, Hawaii taxes little or none of your retirement income.
- If your own 401(k) deferrals or an IRA you funded do the heavy lifting, those withdrawals are taxed on the graduated scale.
Here is a hypothetical to show the mechanic. The figures below are illustrative only, not a real case and not a prediction of your own result.
Say a retiree receives a $30,000 non-contributory pension and also withdraws $25,000 in a year from a 401(k) funded entirely by their own elective deferrals. The pension is exempt, so it drops out of the Hawaii calculation entirely.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf The $25,000 in 401(k) withdrawals is taxable, and at that level it is taxed well down the graduated scale, nowhere near the 11.00 percent top rate that a single filer reaches only above $325,000 of taxable income. Only the self-funded slice of their income faces Hawaii tax; the employer-funded pension beside it does not.
The lesson: in Hawaii, your tax bill tracks how much of your retirement income you funded yourself.
At a Glance: Every Income Type
| Income type | Taxed by Hawaii? | Notes |
|---|---|---|
| Social Security benefits | No | Fully exempt at any age |
| First-tier Railroad Retirement benefits | No | Exempt from the state's net income tax, the same as Social Security |
| Employer-funded (non-contributory) pensions | No | Exempt; common in traditional public and private defined-benefit plans |
| The share of a contributory pension you elected to pay for | Yes | Taxable when you could have taken that money as cash instead; the employer-funded share stays exempt. Contributions you were required to make are not addressed by the elective test, so confirm your plan with the Department of Taxation |
| 401(k) elective deferrals | Yes | The share you chose to defer is taxable on the graduated scale (1.40% to 11.00%, 2025 schedule); an employer's matching or nonelective share stays excluded under an exclusion ratio |
| An IRA you funded yourself | Yes | Fully taxable on the same graduated scale; the money was your own |
| An IRA funded by a rollover from an employer plan | No | Treated as a continuation of the original plan, so an employer-funded pension rolled in keeps its exemption |
| Senior / age-based exclusion | n/a | No age exclusion; the exemption turns on contribution source, not age |
Why This Matters for Care
State tax is not an abstraction when you are pricing assisted living or in-home help. It is money that leaves your budget before the care bill arrives. In Hawaii, how much it takes depends on your income mix.
If a non-contributory pension and Social Security carry your retirement, Hawaii leaves most of your income whole, and the money you planned for housing, health, and care stays available. But if you are drawing on your own 401(k) deferrals or an IRA you funded yourself, those withdrawals are taxable on Hawaii's graduated rates, and the after-tax figure is what actually covers care.
That belongs in an honest funding plan. Build the after-tax number into your budget, not the gross withdrawal, on every dollar Hawaii does tax. Our guide to building a senior care funding plan walks through how to map income, taxes, and care costs together, and the broader guide to paying for senior care covers Medicaid, VA benefits, and private-pay options once you know what your after-tax income actually is. Our guide to retirement accounts for care covers how to time those withdrawals when care costs enter the picture.
Trying to figure out what your income really covers? Talk with Brevy's care navigator to map your after-tax retirement income against real care costs.
Frequently Asked Questions
Does Hawaii tax Social Security benefits?
No. Hawaii does not tax Social Security benefits at all.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf The federal government may still tax part of your benefit depending on your total income, but the state does not.
Does Hawaii tax pensions?
It depends on who funded the pension. An employer-funded, non-contributory pension is exempt from Hawaii tax.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf If you elected to pay part of the cost, money you could have taken as cash instead, the portion traceable to those contributions is taxable.
Does Hawaii tax 401(k) and IRA withdrawals?
It depends on where the money came from. Your 401(k) elective deferrals were your own, so that share of a distribution is taxable, though an exclusion ratio keeps any employer matching or nonelective share exempt. An IRA you funded yourself is fully taxable. But an IRA funded by a rollover from an employer plan is treated as a continuation of that plan, so an employer-funded pension you rolled into an IRA keeps its Hawaii exemption. Whatever is taxable is taxed on Hawaii's graduated scale, 1.40 percent up to a top marginal rate of 11.00 percent for tax year 2025.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf
What is the difference between a contributory and non-contributory pension in Hawaii?
A non-contributory pension was funded entirely by your employer, and Hawaii exempts it.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf A contributory pension includes money you paid in, and the share traceable to contributions you elected to make, money you could have taken as cash instead, is taxable.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf Contributions you were required to make as a condition of the job are not elective, and the Department of Taxation's contribution-source rule does not settle that case on its face, so ask the department or a tax preparer how your plan is treated rather than assuming.
What are Hawaii's income tax rates for retirees?
Hawaii applies its regular graduated income tax to the retirement income it does tax, mainly your 401(k) elective deferrals and distributions from an IRA you funded yourself. For tax year 2025 the schedule runs from 1.40 percent at the bottom to a top marginal rate of 11.00 percent, and that top rate applies to taxable income above $325,000 for a single filer or someone married filing separately, above $650,000 for a married couple filing jointly or a qualifying surviving spouse, and above $487,500 for an unmarried head of household.files.hawaii.gov. (1996). HI DOT TIR 96-5 (Aug 14, 1996) - Taxation of Pensions Under the Hawaii Net Income Tax Law: employer-funded pensions excluded; employee-elective 401(k) deferrals and self-funded IRAs taxable; rollover IRA continues the original plan; Social Security exempt. Retrieved Aug 8, 2026, from https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf Exempt income, such as Social Security and an employer-funded pension, is not taxed at any rate. The current-year rates and thresholds are published in the state's Form N-11 instructions.
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The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.