Updated October 16, 2026. Quick answer: Hawaii does not tax qualifying distributions from an employer-funded pension plan, and the instructions name “section 457 plans like the State of Hawaii Deferred Compensation Plan” as plans whose distributions may be taxable; the instructions do not name 403(b) plans.
Hawaii at a glance
| Item | What the documents say |
|---|---|
| How the state treats 403(b) and 457(b) withdrawals | Employer-funded pension distributions are not taxed; distributions from a deferred compensation plan may be partly or fully taxable |
| Do the state’s documents name these plans? | The documents read name 457 plans but not 403(b) plans |
| Retirement exclusion or credit | Pensions subtraction for qualifying employer-funded plan distributions, with no dollar cap stated |
| Public-employee pension rule | Yes, public retirement system distributions are excluded unless voluntary contributions were made |
| Rate in the documents read | Progressive, with a highest printed rate of 11.00% |
| Changed for 2026? | The documents read describe no 2026 change |
What the Hawaii documents say
The Form N-11 instructions say “Hawaii does not tax qualifying distributions from an employer-funded pension plan”. They add that “Distributions from a deferred compensation plan may be partly or fully taxable”. They describe the qualifying test in the words “if the employee did not contribute to the pension plan”, and a plan funded by the employee’s own elective deferrals is not described as qualifying.
The statute text for the pension exclusion covers “Any compensation received in the form of a pension for past services”.
Withholding and federal tax
Whether a state withholds is a separate rule: see state withholding on retirement withdrawals. Federal rules: 403(b) withdrawal rules and 457(b) withdrawal rules. The IRS says pension and annuity payments from a qualified employer plan have “all or some portion of the amounts you receive may be taxable”.
What the documents do not say
- The documents read never name 403(b) plans.
- They do not say in so many words how a 457(b) funded by employee deferrals is treated beyond calling distributions partly or fully taxable.
Common mistakes
- Assuming Hawaii’s rule for a 401(k) or IRA also covers a 403(b) or 457(b): read whether its documents name the plan.
Related: whether Hawaii taxes 401(k) and IRA withdrawals, Hawaii retirement taxes, whether Hawaii taxes pensions, 403(b) withdrawal rules, 457(b) withdrawal rules, and state withholding on retirement withdrawals.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Compare vetted advisors for retirement income
For U.S. investors with $250,000 or more in investable assets. WiserAdvisor is an independent service matching you with 2 to 3 vetted advisers. Its form asks for your ZIP code and answers to a few questions; a match is not guaranteed.
Free to request, with no obligation to hire. By submitting, you consent to calls, texts and emails from WiserAdvisor and up to three advisers. Advisers pay for introductions.
Clear Money Guide may earn a referral payment for a qualifying completed form. An introduction is not a Clear Money Guide recommendation.
Opens on WiserAdvisor’s site in a new tab.
See how an advisor plans your withdrawals
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment for a qualifying submitted form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- 2025 Hawaii Resident Income Tax Instructions (Form N-11): https://files.hawaii.gov/tax/forms/2025/n11ins.pdf
- Hawaii Revised Statutes 235-7, Other provisions as to gross income, adjusted gross income, and taxable income: https://data.capitol.hawaii.gov/hrscurrent/Vol04_Ch0201-0257/HRS0235/HRS_0235-0007.htm
- Hawaii Revised Statutes 235-51, Tax imposed on individuals; rates: https://data.capitol.hawaii.gov/hrscurrent/Vol04_Ch0201-0257/HRS0235/HRS_0235-0051.htm
- IRS Tax Topic 410, Pensions and annuities: https://www.irs.gov/taxtopics/tc410
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.