Living in Hawaii

Everyone assumes Hawaii is too expensive to retire. The tax picture is better than most people think.

WHAT HAWAII DOESN'T TAX:
Social Security. Not a cent.
Employer-funded pensions, including government and military pensions. The part your employer paid for is excluded from state income tax.

WHAT IT DOES TAX:
Money you contributed yourself, like traditional IRA and 401(k) deferrals, when you withdraw it. Hawaii's brackets run from 1.4% to 11%.

PROPERTY TAX IS THE SURPRISE:
Hawaii's effective property tax rate is about 0.27%, the lowest in the country. Then come the homeowner exemptions:
Oahu: $120,000 off your assessed value, $160,000 at 65. Rising to $140,000 and $180,000 in July 2027.
Kauai: $220,000, then $240,000 at 60 and $260,000 at 70.
Maui: a flat $300,000, and the owner-occupied rate dropped to $1.65 per $1,000 this year.

NEW IN 2026: care paid through Medicare, Medicaid or TRICARE is now exempt from Hawaii's general excise tax.

THE CATCH: daily costs. Honolulu energy prices were up about 21% in a year, and power already costs about 2.6 times the national average. Taxes can work in your favor. Groceries and electricity need a plan.

Not tax advice. Run your numbers with a tax pro.

Comment RETIRE and we'll send you our Retiring in Hawaii planning guide: income, healthcare, housing and the costs that surprise most new retirees.

Sources: Hawaii Dept. of Taxation, AARP, county real property tax offices, BLS

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