Updated October 7, 2026. Quick answer: It depends. Hawaii’s N-11 instructions list “the Federal Thrift Savings Plan” as a deferred compensation plan, and say “Distributions from a deferred compensation plan may be partly or fully taxable”. Separately, “Hawaii does not tax qualifying distributions from an employer-funded pension plan”. The instructions do not say which part of a TSP withdrawal is which.
Hawaii TSP withdrawal tax treatment at a glance
| Item | What the documents say |
|---|---|
| TSP withdrawals | Partly or fully taxable: the instructions name the TSP as a deferred compensation plan |
| FERS annuity | A federal civil service annuity from a government retirement system is among the distributions Hawaii does not tax; the TSP is classed as deferred compensation |
| Rate or limit printed | No rate or cap printed in the instructions read |
| Where it is reported | Form N-11, line 13 (Pensions); HAR sections 18-235-7-02 to 18-235-7-03 |
| Source | Hawaii Department of Taxation |
What the Hawaii documents say
The N-11 instructions name the TSP when they describe deferred compensation. They say a deferred compensation plan is any plan in which the employee chooses whether to put money in or take cash, and give examples: “the Federal Thrift Savings Plan” is on the list. The next line is the answer: “Distributions from a deferred compensation plan may be partly or fully taxable”.
Under line 13 the instructions say “Hawaii does not tax qualifying distributions from an employer-funded pension plan”, including from a government retirement system such as a “federal civil service” annuity. They point to “see sections 18-235-7-02 to 18-235-7-03, HAR” for the rules that decide how much of a deferred compensation distribution is taxable.
A worked example at $30,000 of withdrawals
An illustration: a Hawaii resident takes $30,000 from the TSP in 2026. On the instructions read, the amount may be fully, partly or not taxable depending on the portion that is attributable to the employee’s own pre-tax contributions and the portion treated as employer-funded; the instructions print no rate, and this page does not compute a figure.
If you moved to Hawaii or left it
The rules above are Hawaii’s own, for a resident. Federal law limits what a state you have left may do: “No State may impose an income tax on any retirement income” of someone who is not a resident or domiciliary of that state, as 4 U.S.C. 114(a) puts it. The statute defines retirement income by reference to plans described in the Internal Revenue Code; this page does not decide whether a particular TSP payment meets that definition. If you moved during the year, check each state’s page and return. See CMG’s TSP withdrawal options and FERS, TSP and Social Security sequencing pages for the federal side.
What changes in 2026
The documents read for Hawaii announce no change for 2026 that is specific to TSP withdrawals. The instructions read are for tax year 2025, the newest archived; check the state agency for the 2026 forms when they are published.
What the documents do not say
- The instructions do not say how a TSP withdrawal is divided between taxable and non-taxable parts; the Hawaii Administrative Rules they point to were not archived. The instructions are for tax year 2025 and print no rate.
Common mistakes
- Assuming the answer is the same as for a federal civil service annuity; the instructions class the TSP as deferred compensation, with a different test.
- Assuming the whole withdrawal is tax free because part of it may be; the instructions say partly or fully.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the withdrawal.
Related: TSP withdrawal options, state tax on TSP withdrawals, Hawaii retirement taxes, how Hawaii taxes pensions, and how Hawaii taxes 401(k) and IRA withdrawals.
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Answer againSources
- 2025 N-11 Hawaii Resident Income Tax Instructions: https://files.hawaii.gov/tax/forms/2025/n11ins.pdf
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 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.