Updated October 5, 2026. Quick answer: Yes. Hawaii starts from federal adjusted gross income and taxes interest and dividends at graduated rates from 1.40% to 11.00%. Interest from bonds of other states is added; interest on Hawaii bonds and on federal obligations is not taxed.
How Hawaii treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Taxed on the graduated schedule |
| Rates | For single filers the 2025 schedule prints 1.40% of taxable income up to $9,600 and 11.00% on income over $325,000; the statute prints the same 1.40% to 11.00% steps |
| Starting point | “Report the federal AGI from the appropriate line of federal Form 1040” |
| Other states’ bonds | “If you received interest from bonds issued by another State” it is added, “including interest distributions from a mutual fund investing in these bonds” |
| Hawaii bonds | “Do not include interest from bonds issued by Hawaii,” which covers Hawaii municipal bonds, and bonds of Puerto Rico, the U.S. Virgin Islands, Guam and American Samoa |
| U.S. obligations | Subtracted: “Interest on Federal Obligations, Including U.S. Savings Bonds” The booklet points to a Tax Information Release for which obligations qualify and prints no mutual fund pass-through rule |
A $20,000 example
Taxable dividends and interest of $20,000 taxed wholly at the lowest rate, 1.40%, would add $280; taxed wholly at the top rate, 11.00%, $2,200. Your total taxable income decides the bracket.
What changes in 2026
The documents print no 2026 rate change. The statute prints new bracket thresholds “taxable year beginning after December 31, 2026:” with the same 1.40% to 11.00% rate steps.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether Hawaii taxes capital gains, whether Hawaii taxes pensions, how Hawaii taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- 2025 Form N-11 Individual Income Tax Resident Booklet and Instructions: https://files.hawaii.gov/tax/forms/2025/n11ins.pdf
- HRS section 235-51, Tax imposed on individuals; rates: https://www.capitol.hawaii.gov/hrscurrent/Vol04_Ch0201-0257/HRS0235/HRS_0235-0051.htm
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.