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Overview of Hawaii Taxes

Hawaii has a progressive income tax and relatively low property taxes. High earners will pay the 2nd highest marginal income tax rate in the country but all homeowners will pay the lowest effective property tax rate. While Hawaii doesn’t technically have a state sales tax, there is a general excise tax that businesses pay on all business activities and this is generally passed onto consumers.

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Hawaii state tax quick facts
  • Income tax: 1.4% - 11%
  • Sales tax: 0% with a general excise tax (GET) of 4% - 4.5%
  • Property tax: 0.28% average effective rate
  • Gas tax: 45 cents per gallon of regular gasoline, 42.38 cents per gallon of diesel

If you’re thinking about a move to the Aloha State, you’ll want to know how the state’s tax system affects your finances. The most significant tax in the state is the personal income tax. Income earners on one of Hawaii’s eight main islands pay tax rates between 1.4% and 11%, which for high earners is the 2nd highest top rate in the country.

If you plan on forgoing employment in favor of becoming a full-time beach bum, there is some good news. Hawaii has some of the lowest property taxes in the country. Property taxes average just 0.28% of property values annually, the lowest effective property tax rate in the U.S. While Hawaii doesn’t technically have a state sales tax, there is a general excise tax that businesses pay on all business activities and this is generally passed onto consumers. The excise tax is 4% with some counties charging an additional 0.5%.

Hawaii Income Tax

Hawaii’s top income tax rate of 11% is the second highest in the United States, however only a small percentage of taxpayers face that rate. That’s because the state has 12 tax brackets, more than any other state. The table below shows brackets and marginal tax rates for all filing statuses in Hawaii.

Income Tax Brackets

Single Filers
Hawaii Taxable IncomeRate
$0 - $2,4001.40%
$2,400 - $4,8003.20%
$4,800 - $9,6005.50%
$9,600 - $14,4006.40%
$14,400 - $19,2006.80%
$19,200 - $24,0007.20%
$24,000 - $36,0007.60%
$36,000 - $48,0007.90%
$48,000 - $150,0008.25%
$150,000 - $175,0009.00%
$175,000 - $200,00010.00%
$200,000+11.00%
Married, Filing Jointly
Hawaii Taxable IncomeRate
$0 - $4,8001.40%
$4,800 - $9,6003.20%
$9,600 - $19,2005.50%
$19,200 - $28,8006.40%
$28,800 - $38,4006.80%
$38,400 - $48,0007.20%
$48,000 - $72,0007.60%
$72,000 - $96,0007.90%
$96,000 - $300,0008.25%
$300,000 - $350,0009.00%
$350,000 - $400,00010.00%
$400,000+11.00%
Married, Filing Separately
Hawaii Taxable IncomeRate
$0 - $2,4001.40%
$2,400 - $4,8003.20%
$4,800 - $9,6005.50%
$9,600 - $14,4006.40%
$14,400 - $19,2006.80%
$19,200 - $24,0007.20%
$24,000 - $36,0007.60%
$36,000 - $48,0007.90%
$48,000 - $150,0008.25%
$150,000 - $175,0009.00%
$175,000 - $200,00010.00%
$200,000+11.00%
Head of Household
Hawaii Taxable IncomeRate
$0 - $3,6001.40%
$3,600 - $7,2003.20%
$7,200 - $14,4005.50%
$14,400 - $21,6006.40%
$21,600 - $28,8006.80%
$28,800 - $36,0007.20%
$36,000 - $54,0007.60%
$54,000 - $72,0007.90%
$72,000 - $225,0008.25%
$225,000 - $262,5009.00%
$262,500 - $300,00010.00%
$300,000+11.00%

Those rates apply to Hawaii taxable income, which is based on Hawaii adjusted gross income (AGI). This is similar to the federal AGI that appears on your IRS form 1040, with some key differences. Several types of income that are taxable federally are not taxable in Hawaii and must be subtracted to calculate Hawaii AGI. Many types of pensions are exempt, as are all Social Security benefits.

Payments made to an individual housing account (intended for the down payment on a first home) can also be subtracted up to $5,000 per year and $25,000 total. Other subtractions include interest from federal obligations, like U.S. Savings Bonds, and benefits from, or premiums paid to, legal services plans.

After determining your state AGI, you can calculate Hawaii taxable income by subtracting deductions and personal exemptions. You may claim itemized deductions if the total of your itemized deductions you claim is larger than the Hawaii standard deduction. That’s $2,200 for single filers and married person filing separately, $4,400 for joint filers and $3,212 for heads of household.

Hawaii Tax Credits

Once you have calculated your tax liability, there are tax credits you can claim in Hawaii to reduce the amount you have to pay, and in some cases, if your tax liability is zero, actually return money to you (these are called refundable credits). The credits available include:

  • Refundable Food/Excise Tax Credit – taxpayers with income less than $50,000 per year may qualify for this credit based on food sales taxes
  • Credit for Low-Income Household Renters – a refundable credit for renters with Hawaii AGI less than $30,000
  • Credit for Child and Dependent Care Expenses – a refundable credit for some child care expenses
  • Credit for Child Passenger Restraint System – a refundable credit of $25 for taxpayers who purchased a child safety seat

Hawaii Capital Gains Tax

In Hawaii, long-term capital gains are taxed at a maximum rate of 7.25%, while short-term capital gains are taxed at the full income tax rates listed above. Long-term gains are those realized in more than year.

Hawaii Sales Tax

Hawaii doesn’t technically have a sales tax. The state does have a general excise tax (GET) that businesses are required to pay. They are allowed to (and often do) pass this tax on to customers. So in effect, Hawaiians statewide pay an extra 4% for services and goods. Additionally, one locality has an additional excise tax—Honolulu County (which is coterminous with the island of Oahu) imposes an extra 0.5% to support the county transportation system. That means the total tax rate in Honolulu County is 4.5%.

While Hawaii’s GET is lower than the sales tax of any state with one, the rates apply to far more products and services than do sales taxes in most other states. Hawaii’s tax applies not only to finished products being sold to a consumer, but to all goods and services sold in the state, even if they are intended for resale. So, for example, the tax applies to health care providers, auto mechanics and legal services—services that are often untaxed in other states.

As mentioned above, businesses in Hawaii are able to pass the general excise tax to customers. The result is that good and services often cost more. So if a business takes an item that would normally cost $100, and charges an additional $4.00 to cover the tax, the customer is effectively paying a 4% sales tax. But businesses in Hawaii are actually allowed to pass on a slightly higher percent to customers to cover the cost of the excise tax. The maximum rate passed on to customers is 4.712% in Honolulu County and 4.166% elsewhere.

The most significant exception to the Hawaii GET is for prescription drugs and prosthetic devices. These are totally exempt for taxation. However, food (which is also exempt in many other states) is subject to the tax, although low income taxpayers may be eligible for a tax credit to negate some of the cost of the tax.

Hawaii Property Tax

Good news about that Maui beach house you’ve been eyeing: the property tax bill on it is likely to be relatively low. That’s because Hawaii has some of the lowest property tax rates in the country. The state’s average effective property tax rate (annual taxes as a percentage of home value) is just 0.28%, lowest of any state. Keep this in mind, however: because of high home values, average annual property tax payments in Hawaii are $1,399, which ranks as only the 18th lowest.

Hawaii Cigarette Tax

The tax on cigarettes in Hawaii is the fifth highest in America. The tax adds up to $3.20 per pack of 20 cigarettes.

Hawaii Alcohol Tax

Excise taxes on alcohol in Hawaii vary greatly depending on the type of alcohol being purchased. The state’s beer taxes rank as the fifth highest in the country, at 93 cents per gallon or about 8.7 cents per beer. The state’s liquor taxes, however, add up to just $5.98 per gallon or 7 cents a drink. That’s the 22nd highest rate in the U.S.

Hawaii Estate Tax

There is an estate tax in Hawaii. The tax generally conforms to the federal estate tax, albeit with lower tax rates. The exemption is $5.43 million, which means that estates with a value below that cutoff (the vast majority of estates) do not pay any estate taxes. For any estate valued above that cutoff, marginal rates are 10% for the first $1 million ($5.43 – $6.43 million), 11% for the next $1 million and so on up to 15%. The top rate is 15.7% for estates with a value of $10.43 million and higher.

Hawaii Gas Tax

While your options for long-distance drives are limited in Hawaii, you should still take the state’s high gas taxes into account when planning a trip. The tax on regular gasoline is 45 cents per gallon, 4th highest in the country. When combined with Federal gas taxes, the total rate is 63.4 cents per gallon. Diesel is taxed at a state rate of 42.38 cents per gallon, or 66.78 cents per gallon combined with federal taxes.

Photo credit: ©iStock.com/SergiyN
  • There are three active volcanoes in Hawaii: Maunaloa, Kilauea and Loihi, which is an underwater volcano.
  • The earliest human settlers to the Hawaiian Islands may have arrived as early as 300 CE (or 300 AD).
  • According to the state of Hawaii, the Hawaiian chain comprises 137 islands but you generally only hear about the eight major islands.

Places with the Lowest Tax Burden

Are you curious how your tax burden stacks up against others in your state? SmartAsset’s interactive map highlights the counties with the lowest tax burden. Scroll over any county in the state to learn about taxes in that specific area.

Worse
Better
Rank County Income Tax Sales Tax Property Tax Fuel Tax

Methodology

Where you live can have a big impact on both which types of taxes you have to pay each year and how much money you spend on them. SmartAsset calculated the amount of money a specific person would pay in income, sales, property and fuel taxes in each county in the country and ranked the lowest to highest tax burden.

To better compare income tax burdens across counties, we used the national median household income. We then applied relevant deductions and exemptions before calculating federal, state and local income taxes.

In order to determine sales tax burden we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a county by the household income less income tax. This product is then multiplied by 35% to estimate the sales tax paid.

For property taxes, we compared the median property taxes paid in each county.

For fuel taxes, we first distributed statewide vehicle miles traveled down to the county level using the number of vehicles in each county. We then calculated the total number of licensed drivers within each county. The countywide miles were then distributed amongst the licensed drivers in the county, which gave us the miles driven per licensed driver. Using the nationwide average fuel economy, we calculated the average gallons of gas used per driver in each county and multiplied that by the fuel tax.

We then added the dollar amount for income, sales, property and fuel taxes to rank the counties to calculate a total tax burden.

Sources: US Census Bureau 2015 American Community Survey, Government Sources, Avalara, American Petroleum Institute, GasBuddy, UMTRI, Federal Highway Administration, SmartAsset

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