Hawaii does not tax Social Security benefits. Every dollar of your Social Security retirement, survivor, or disability payment is excluded from Hawaii’s state income tax, regardless of your age, filing status, or how much other income you have. The catch is that the IRS can still tax up to 85% of your benefits at the federal level, so “Hawaii doesn’t tax Social Security” is only half the picture.
How the Hawaii Exemption Works
Hawaii’s exemption is built into the state tax code. Under Hawaii Revised Statutes Section 235-2.3(b)(3), the state declines to adopt Internal Revenue Code Section 86, the federal provision that makes Social Security and Tier 1 Railroad Retirement benefits taxable.1Justia Law. Hawaii Revised Statutes Title 14 Chapter 235 Section 235-2.3 Because Hawaii never adopted the rule, benefits simply never enter the state tax calculation.
There is no income cap, no phase-in, and no application. A retiree collecting $20,000 a year gets the same full exclusion as someone collecting $50,000. Tier 1 Railroad Retirement benefits receive identical treatment.2CCH AnswerConnect. Hawaii – Subtractions–Retirement Plans and Benefits Social Security Disability Insurance (SSDI) is treated the same as retirement benefits at the state level. Supplemental Security Income (SSI) isn’t taxable at either level.3Internal Revenue Service. Regular and Disability Benefits
Federal Tax Can Still Apply
The state exemption only shields you from Hawaii tax. The IRS uses a “combined income” formula, which equals your adjusted gross income plus tax-exempt interest plus half your Social Security benefits.4Social Security Administration. Must I Pay Taxes on Social Security Benefits? Once combined income crosses certain thresholds, part of your benefits becomes federally taxable:
- Single filers: above $25,000, up to 50% of benefits are taxable; above $34,000, up to 85%.
- Married filing jointly: above $32,000, up to 50%; above $44,000, up to 85%.
- Married filing separately, if you lived with your spouse at any point during the year: the base amount is $0, so benefits are almost always taxable.
These thresholds haven’t been adjusted for inflation since they were set in the 1980s, so more retirees cross them each year.3Internal Revenue Service. Regular and Disability Benefits SSDI follows the same combined-income rules federally.
What Hawaii Does Tax in Retirement
Social Security is out of the picture, but the rest of your retirement income is treated less generously. Hawaii draws its main line between money an employer contributed and money you contributed yourself.
Employer-Funded Pensions and Military Retirement
Distributions from employer-funded pension plans, public or private, are generally excluded from Hawaii income tax under HRS 235-7(a)(2) and (3).5State of Hawaii Department of Taxation. Tax Information Release No. 90-4 For plans funded jointly, only the employer-contributed portion and its earnings qualify. Military retirement pay is also exempt.
401(k)s and Traditional IRAs
This is where retirees are often surprised. Distributions from 401(k) plans and traditional IRAs are fully taxable in Hawaii. The state treats them as employee-funded, because a 401(k) works through the employee’s salary deferral election and traditional IRAs are funded by the individual. Even when a 401(k) sits inside a larger profit-sharing plan, the state taxes the sub-accounts separately: the profit-sharing portion funded by the employer is exempt, and the 401(k) portion is taxable.6Department of Taxation, State of Hawaii. TIR 96-5 – Taxation of Pensions Under the Hawaii Net Income Tax Law
SEP Plans and Roth IRAs
Simplified Employee Pension (SEP) plan distributions are generally excluded because the state treats SEPs as employer-funded pensions.6Department of Taxation, State of Hawaii. TIR 96-5 – Taxation of Pensions Under the Hawaii Net Income Tax Law Qualified Roth IRA distributions are tax-free federally and get the same treatment in Hawaii. To be qualified, the account must have been open at least five years, and the withdrawal must come after age 59½, due to disability, or under certain other limited circumstances.7Internal Revenue Service. Roth IRAs Non-qualified distributions are taxable to the extent of earnings.
Any taxable retirement income runs through Hawaii’s graduated brackets, which range from 1.4% to 11%.8Hawaii Department of Taxation. Tax Year Information – 2025 Retirees 65 and older can claim an additional personal exemption on top of the standard $1,144 per person, and those who are blind, deaf, or totally disabled may claim a $7,000 disability exemption in place of the standard personal exemption.9Hawaii Department of Taxation. FAQs
Reporting Social Security on Your Hawaii Return
On Hawaii Form N-11, your Social Security income is backed out on Line 14. The instructions direct you to enter the taxable Social Security amount from federal Form 1040 (line 6b), and Hawaii subtracts it so it never reaches your state taxable income.10Hawaii Department of Taxation. Instructions for Form N-11 There’s no special form and no application. If Social Security is your only income, you likely don’t need to file a Hawaii return at all, because your state taxable income would be zero.
You’ll still get Form SSA-1099 each January showing your total benefits. Box 5 shows the net figure that flows to your federal return.11Social Security Administration. POMS GN 05002.300 – Examples of Completed SSA-1099s Keep the form in your records even though the amount won’t appear on the Hawaii return.
Moving to Hawaii From Another State
If you’re relocating in retirement, federal law prohibits your former state from taxing your pension income once you’ve established Hawaii residency.12Office of the Law Revision Counsel. 4 USC 114 – Limitation on State Income Taxation of Certain Pension Income Only your state of residency can tax retirement plan distributions. For the year you move, you may need to file part-year returns in both states, splitting income between the months in each. Social Security is exempt in Hawaii from the day you establish residency. Eight states still tax Social Security to varying degrees: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. If you moved from one of them, check how they treated your benefits during the months you were still a resident there.