Hawaii Retirement Taxes (2026): The Pension Split, the 11% Rate, and the Nation’s Highest Estate Tax

2026 edition · statute-cited · part of Clear Money Guide’s 51-state retirement tax series. This guide covers state taxes on retirement income and estate transfers; property and sales taxes vary by county and are outside its scope.

Updated July 24, 2026. Quick answer: Hawaii’s retirement tax code splits on a single question: who funded the money? Employer-funded (non-contributory) pension income is fully exempt regardless of amount — while employee-funded money, meaning 401(k) elective-deferral distributions and withdrawals from IRAs you funded yourself, is taxable at graduated rates reaching 11%, among the nation’s highest. Contributory pensions split proportionally. Social Security is never taxed. And at death, Hawaii runs an estate tax with a $5,490,000 exemption — fixed since 2018, never indexed — and a top rate of 20%, tied with Washington for the highest state estate-tax rate in America.

More state retirement-income schedules, line by line: Hawaii Form N-11 line 13.

Inherited an IRA? What the state’s own documents say about taxing those withdrawals: Hawaii tax on inherited IRA withdrawals.

Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does Hawaii tax 403(b) and 457(b) withdrawals.

Married, or planning for a spouse’s death? Whether the state is a community property state, from its own statutes: Is Hawaii a community property state?.

Selling your home? How the state taxes the profit, from its own tax documents: Does Hawaii tax the profit from selling your home?.

The state’s income tax schedule: the Hawaii tax brackets for 2026.

Taking money out of your TSP? How the state taxes it, from its own tax documents: Does Hawaii tax TSP withdrawals?.

Looking ahead to 2027? The state’s estate tax exemption for deaths in 2027, from its own tax documents: Hawaii estate tax exemption 2027.

For trust income specifically: does Hawaii tax trust income.

For dividends and interest specifically: does Hawaii tax dividends and interest.

Inheriting from, or planning for, someone in this state? Whether the state has an inheritance tax, from its own tax documents: Does Hawaii have an inheritance tax?.

For annuity payments specifically: does Hawaii tax annuity income.

Making a gift or planning an estate? The state’s gift tax answer, from its own tax documents: Does Hawaii have a gift tax?.

For military retired pay: does Hawaii tax military retirement.

For the sale of stocks, funds or real estate: does Hawaii tax capital gains.

For 401(k) and IRA withdrawals specifically: does Hawaii tax 401(k) and IRA withdrawals.

Before the tax question, the Hawaii ERS Hybrid plan payment options, refund options and service credit rules: Hawaii ERS retirement decisions.

The employer-funded / employee-funded split (the rule guides oversimplify)

Most national roundups say Hawaii “exempts pensions.” The actual rule: income from an employer-funded pension is exempt; distributions attributable to your own elective deferrals, such as a 401(k) you funded from salary, are taxable, and so are withdrawals from an IRA you funded yourself, fully or partly depending on whether it holds deductible or nondeductible contributions. A rollover IRA is treated as a continuation of the plan that supplied the money, and a plan that is partly pension and partly deferred compensation, such as a 401(k) with an employer matching program, uses Schedule J to figure the taxable amount. A contributory pension (common for government workers) is split: the employer-funded portion exempt, the employee-contribution portion taxable. For a retiree living on a company DB pension, Hawaii is genuinely favorable; for a 401(k)/IRA retiree, the 12-bracket schedule (1.4% to 11%) treats withdrawals like wages. Act 46 (2024) is phasing in large standard-deduction increases — $8,000 single / $16,000 joint for TY2026 (up from $4,400 single and $8,800 joint for 2025), with further steps through 2031 — so Hawaii is mechanically getting more retiree-friendly each year, and almost no coverage says so.

How Hawaii taxes retirement income (statute-cited)

Income tax	Graduated, 12 brackets, 1.4% to 11% (standard deduction rising through 2031 under Act 46)
Social Security	Not taxed (fully exempt)
Employer-funded pensions	Fully exempt, no dollar cap, when paid by reason of retirement, disability, or death (early distributions subject to the 10% federal penalty tax are taxable); contributory pensions exempt in proportion to the employer-funded share
401(k) / IRA	Taxable when employee-funded (401(k) deferrals, IRAs you funded yourself); a rollover IRA follows the plan it came from, and a hybrid plan with an employer match is split between exempt and taxable parts
Military retirement	Exempt (treated as an employer-funded government pension)
Estate tax	Yes — exemption $5,490,000 (fixed since 2018, not indexed); rates 10% to 20% — the top rate is tied with Washington’s as the nation’s highest
Inheritance tax	None

Estate and probate: the 20% ceiling and the $100,000 affidavit

Hawaii’s estate-tax exemption has sat at $5,490,000 since 2018 while the federal exclusion rose from $5,490,000 in 2017 to $15,000,000 in 2026 — and its 20% top rate (on the taxable amount over $10M above the exemption) matches Washington’s as the country’s steepest. Probate itself is friendlier: Hawaii is a UPC state with “reasonable compensation” (HRS §560:3-719 — the old percentage schedule was repealed decades ago), and small estates up to $100,000 can collect personal property by affidavit (HRS §560:3-1201), with motor vehicles transferable regardless of value. Full table: estate tax by state. Context: probate cost by state · small-estate limits by state.

Is Hawaii a good state to retire in for taxes?

It depends entirely on your income’s plumbing: a retiree on Social Security plus an employer-funded pension can owe Hawaii almost nothing, while a retiree drawing on a 401(k) or an IRA funded with their own money faces up to 11% on withdrawals — the widest single-state spread in the country. At death, the fixed $5.49M exemption and 20% ceiling reach further every year by standing still. Add the highest cost of living in the nation (outside this guide’s scope) and the honest answer: Hawaii rewards pension retirees and penalizes portfolio retirees more sharply than any other state.

Hawaii vs. common alternatives

State	Social Security	Pension / 401(k) / IRA	Estate tax	Inheritance tax
Hawaii	Not taxed	Employer-funded pensions fully exempt; employee-funded 401(k) and IRA money taxable (to 11%)	Yes — $5.49M, top rate 20%	None
California	Not taxed	Fully taxable as ordinary income (to 13.3%)	None	None
Washington	Not taxed	Not taxed (no income tax)	Yes: $3M exclusion, top rate 20% (deaths from July 1, 2026)	None
Nevada	Not taxed	Not taxed (no income tax)	None	None

Comparison rows summarize general rules; see our 51-state retirement tax table for statute-cited detail.

Considering a Roth conversion? The converted amount is taxed as ordinary income in the year you convert, and Hawaii may treat it differently from the retirement income above — see how all 51 jurisdictions tax Roth conversions.

Finding a financial advisor in Hawaii

Per the SEC’s July 2026 Investment Adviser roster, Hawaii has 20 SEC-registered advisory firms (#48 nationally) managing $9.0 billion (#49 by AUM). Full breakdown: Hawaii advisor statistics. Reviewing fee structures: fee-drag calculator.

Thinking about moving?

Four taxes change when you move state in retirement, not one: income tax on withdrawals, state estate tax, state inheritance tax, and what probate costs your heirs. Corridor comparisons involving Hawaii:

• Hawaii to Nevada retirement taxes
• Hawaii to Texas retirement taxes

Leaving Hawaii? See leaving Hawaii in retirement.

Compare any two states with the retirement tax comparison tool, or browse all corridors at the relocation hub.

What probate costs in Hawaii

Hawaii sets probate compensation by a “reasonable fee” standard with no percentage schedule, so anyone quoting a firm figure is estimating. The $100,000 small-estate route in HRS §560:3-1201 is titled “Collection of personal property by affidavit,” and its text covers tangible and intangible personal property only; it does not mention real property. Full detail with the governing statute, the court filing fee and the threshold: Hawaii probate cost. To price a specific estate, use the probate cost calculator.

Cite or share this guide

Suggested citation: Clear Money Guide, “Hawaii Retirement Taxes (2026 edition),” statute-cited; clearmoneyguide.com/hawaii-retirement-taxes/. Free to cite with attribution and a link. Data verified July 23–24, 2026 against state statutes, session laws, and revenue-department guidance.

Figures verified against Hawaii Revised Statutes §235-7, §236E-6, §236E-8, §560:3-719 and §560:3-1201, Hawaii Department of Taxation Announcement 2024-03 and Tax Information Release 96-5, and Washington RCW 83.100.020 and 83.100.040 on September 30, 2026; the specific military-pension exemption text, the federal exclusion comparison and the California and Nevada rows were not re-checked.

Primary sources

• https://files.hawaii.gov/tax/legal/tir/1990_09/tir96-5.pdf
• https://taxfoundation.org/data/all/state/state-income-tax-rates-2026/
• https://tax.hawaii.gov (Estate & Transfer Tax, HRS ch. 236E)
• https://taxfoundation.org/data/all/state/estate-inheritance-taxes/
• https://www.capitol.hawaii.gov/hrscurrent/vol12_ch0501-0588/hrs0560/HRS_0560-0003-1201.htm
• https://www.capitol.hawaii.gov/hrscurrent/Vol13_Ch0601-0676/HRS0607/HRS_0607-0005.htm