Tags: Retirement | retirement | Hawaii | taxes

Taxes for Retirees in Hawaii

By    |   Wednesday, 03 Jun 2015 07:20 PM

For those considering retirement to the islands of Hawaii, it’s important to understand the state’s tax system. Since cost of living is relatively high, taxes can play a major role in determining a monthly budget.

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According to the Tax Foundation, taxes overall in Hawaii are actually below the national average. But state sales taxes in Hawaii are significantly higher than on the mainland, since tourism is one of the main sources of income for locals. There is a 4 percent general excise tax (excluding prescription drugs), and the island of Oahu has an additional .5 percent tax to fund the mass transit there. There is a 63.4 cents per gallon tax on gasoline, and local taxes can add up to 18 cents on top of that tax, according to Hawaiigasprices.com. If you smoke, cigarettes are especially pricey with a $3.20 tax per pack.

However, the progressive tax system can have benefits for retirees. To see a breakdown of tax rates, go to Bankrate’s roundup here. While the personal income tax rate ranges from 1.4 percent to 11 percent, taxpayers over 65 receive an additional personal exemption. Social Security and many pensions – including out-of-state government – are also exempt. If you contributed to your private employer pension plan, the state of Hawaii will only partially tax those distributions. Military disability retired pay (with some stipulations), VA disability dependency compensation, and retired military pay are also not taxed, according to the U.S. Army.

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Property taxes, compared to the mainland, are low. Cars and boats are not taxed, but real property and land are. Those who are between the ages of 60 and 69 can double the homestead exemption of $12,000 and those 70 and older can claim 2.5 times the exemption. The rates are slightly differently in the city and county of Honolulu. Retirees get an added benefit: Residents who are 55 and older are exempt from property taxes on $60,000 to $120,000, depending on their age, regardless of income. Learn more at the County of Hawaii’s Real Property Tax Office site.

There is an estate tax to consider as well. The state of Hawaii imposes a tax on estates over $3.5 million for residents and $60,000 for non-residents. As a result, MarketWatch named Hawaii (along with Delaware) one of the best places to die.

While the tax system is relatively steep in Hawaii, it just takes planning and budgeting to retire to the islands with peace of mind.

All tax information in this article is for general planning only; please consult a tax specialist for advice.

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For those considering retirement to the islands of Hawaii, it's important to understand the state's tax system. Since cost of living is relatively high, taxes can play a major role in determining a monthly budget.
retirement, Hawaii, taxes
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2015-20-03
Wednesday, 03 Jun 2015 07:20 PM
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