Yes, Hawaii is a high tax state — by the broadest measure, it carries the heaviest combined state and local tax burden in the country, with residents paying roughly 13.3% of their personal income to state and county governments.1Hawaii Department of Taxation. Comparing Hawaii’s Income Tax Burden to Other States A top income tax rate of 11%, a General Excise Tax that reaches almost every transaction, and steep lodging taxes on visitors do most of the work. The one genuine break is property tax, which has the lowest effective rate in the nation. That single advantage does not come close to offsetting the rest.
Where the Income Tax Hits
Hawaii’s personal income tax has 12 brackets for each filing status. Rates start at 1.4% on the first few thousand dollars of taxable income and climb to 11% on taxable income above $200,000 for single filers and above $400,000 for joint filers.2Justia. Hawaii Revised Statutes Section 235-51 – Tax Imposed on Individuals That 11% ties a small handful of states for the highest top marginal rate in the country.
The brackets are also compressed, which is what makes the system bite in the middle. A single filer earning $48,000 is already in the 8.25% bracket, and joint filers hit that rate at $96,000.2Justia. Hawaii Revised Statutes Section 235-51 – Tax Imposed on Individuals Middle-income earners face marginal rates that many other states reserve for incomes well into six figures.
Capital gains do not get a break. Hawaii taxes all capital gains as ordinary income, so long-term gains on investments or on the sale of a home run through the same brackets, up to 11%.3Hawaii Department of Taxation. Outline of the Hawaii Tax System as of July 1, 2025 Someone selling a long-held house or liquidating a portfolio in Hawaii will owe a significantly larger state bill than they would in most other states.
For tax year 2026, the standard deduction is $8,000 for single filers and $16,000 for married couples filing jointly, with a personal exemption of $1,144 per taxpayer and dependent. Residents 65 or older receive double that exemption, and a separate $7,000 exemption is available for taxpayers who are blind, deaf, or disabled.4Hawaii Department of Taxation. Estimating the Impacts of Hawaii’s 2024 Tax Cut Bill These reduce taxable income but do not change the overall shape of the burden.
Why the General Excise Tax Hurts More Than It Looks
Hawaii does not have a traditional sales tax. In its place is the General Excise Tax under Chapter 237 of the Hawaii Revised Statutes, which is technically a tax on businesses for the privilege of operating in the state. Businesses almost universally pass it through to customers, so it functions like a sales tax with far broader reach.
The base rate is 4%, and all four counties now impose a 0.5% surcharge, bringing the total to 4.5% statewide.5Hawaii Department of Taxation. County Surcharge on General Excise and Use Tax That number sounds moderate next to sales tax rates in states like California or Tennessee. The comparison misleads for two reasons.
First, the GET applies to almost everything. Groceries, medical services, rent, professional fees, construction contracts, and wholesale transactions are all taxable. Most states with a sales tax exempt groceries or prescription drugs or services. Hawaii does not.
Second, the GET pyramids. When a manufacturer pays GET on raw materials, that cost gets built into the price charged to a wholesaler, who pays GET again, and the retailer then pays GET on the marked-up price. By the time a product reaches the consumer, the cumulative tax embedded in the price pushes the effective rate on general goods to roughly 11%, far above the 4.5% headline. A family spending most of its income on rent, groceries, and basic services pays the GET on all of it, with no exemptions or credits to soften the hit.
A parallel use tax at 4.5% applies to goods and services purchased from out-of-state sellers who don’t collect the GET, with a credit available for sales tax already paid to another state.6Hawaii Department of Taxation. Tax Facts 95-1 – Use Tax Many residents don’t realize this applies to their online purchases.
The One Break: Property Tax
Real property taxes in Hawaii have the lowest effective rate in the nation at approximately 0.29% of assessed value. The four counties, not the state, set rates and handle assessments based on fair market value.
The low percentage is partly offset by what it applies to. With a statewide median single-family home price near $995,000 as of mid-2026, a 0.29% rate on a $1 million property still produces about $2,900 in tax before any exemptions. Each county offers a homeowner exemption for primary residences, with larger exemptions for seniors and disabled residents. Even so, property tax is the one category where Hawaii residents catch a real break. Most mainland homeowners face effective rates two to four times higher. Renters, of course, see none of this benefit directly.
What Retirees Actually Pay
Hawaii’s treatment of retirement income varies by source, and the differences matter.
- Social Security benefits are completely exempt from Hawaii income tax.7Hawaii Department of Taxation. Taxing Pensions and Other Retirement Income
- Military retirement pay is fully exempt.8MyArmyBenefits. Hawaii Military and Veterans Benefits
- The portion of a 401(k) or pension funded by employer contributions, including matching funds and profit sharing, is generally exempt.
- Withdrawals from traditional IRAs and 401(k)s funded by your own pre-tax contributions are taxed as ordinary income, running through the same 1.4% to 11% brackets as wages.
A retiree living mainly on Social Security and military retirement pay could owe little or no state income tax. A retiree drawing heavily from a traditional IRA or 401(k) funded with their own contributions will feel the full weight of Hawaii’s brackets. Roth conversion and withdrawal sequencing matter more here than in most states.
Travelers and Short-Term Rental Owners
Anyone renting a hotel room, vacation rental, or bed-and-breakfast in Hawaii pays the Transient Accommodations Tax. As of January 1, 2026, the TAT rate rose from 10.25% to 11%, where it will remain through at least 2030.9Hawaii Department of Taxation. Department of Taxation Announcement No. 2026-01 It applies to accommodations rented for fewer than 180 consecutive days.
The TAT is collected on top of the GET. A visitor staying at a Honolulu hotel effectively pays 15.5% in combined state and county taxes on their room before any resort fees. For owners operating short-term rentals, the TAT and GET are separate filings with separate deadlines, and missing either can bring penalties and back taxes.
Estate Tax
Hawaii is one of roughly a dozen states that imposes its own estate tax on top of the federal one. The Hawaii exemption threshold is $5,490,000, far lower than the current federal exemption, and estates above that face graduated rates reaching 20% on amounts over $10 million.10Hawaii Department of Taxation. Instructions for Form M-6 Hawaii Estate Tax Return
Form M-6 is due nine months after the date of death, with an automatic six-month extension available when the federal extension is attached. Hawaii recognizes portability of the unused exemption between spouses, but only if a timely return is filed, even for estates that fall below the taxable threshold.10Hawaii Department of Taxation. Instructions for Form M-6 Hawaii Estate Tax Return Skipping that filing is a common and costly mistake.
Who Feels It Most
Measured solely by individual income tax collections relative to personal income, Hawaii ranks closer to eleventh.1Hawaii Department of Taxation. Comparing Hawaii’s Income Tax Burden to Other States The gap between that ranking and the first-place total burden shows where the real weight lies: the GET and other consumption-based taxes push Hawaii’s overall burden well past what the income tax alone would suggest.
For middle-income families, the picture is heavy on every side. The income brackets bite in the mid-range, the GET touches every dollar spent on groceries, rent, and services, and the high cost of goods in an island economy means more dollars flow through taxable transactions. Homeowners get a meaningful property tax break; renters do not. Retirees on Social Security and military pensions get real relief; those living off a traditional IRA do not. The exact bill depends on income, spending patterns, and whether you own or rent, but the answer to the underlying question is consistent: Hawaii taxes more of its residents’ income than any other state.