How Much Is Tax In Hawaii: A Detailed Overview

With its beautiful beaches, vibrant culture, and relaxed island lifestyle, moving to Hawaii is a dream for many. But before packing your bags, you’ll want to understand exactly how much it will cost to live there—especially when it comes to taxes.

In short, Hawaii residents pay among the highest overall tax burdens in the U.S., with individual income taxes, general excise taxes, real property taxes, and more adding up for locals. Read on for a deep dive into Hawaii’s complex tax structure.

This comprehensive guide will cover everything you need to know about the specific tax rates for income, sales, property and more that contribute to Hawaii’s high overall tax burden compared to other states. We’ll also provide tips and strategies for reducing your Hawaii taxes.

Hawaii Individual Income Tax Rates and Brackets

Hawaii’s Progressive Income Tax Structure and Rates

Hawaii has a progressive income tax system with rates ranging from 1.4% to 11% (as of 2023). The state income tax rates apply to different income brackets, with higher rates applying to higher income levels.

The top rate of 11% applies to incomes above $200,000 for single filers and $400,000 for married joint filers.

This structure means higher income residents pay a greater share of taxes. For example, a single filer with $50,000 in taxable income would have an effective tax rate around 3.2%, while someone with $1 million in income would pay around 8.25% of their income in taxes.

Filing Thresholds and Income Brackets in Hawaii

The income brackets for Hawaii’s individual income tax rates for the 2023 tax year are:

Those with incomes below the filing thresholds are not required to file taxes in Hawaii. The standard deduction is $1,144 for single filers and $2,288 for married joint filers as of 2023.

Comparison to Other States’ Top Income Tax Brackets

Hawaii’s top income tax rate of 11% is among the highest in the country. However, for most residents it compares favorably to other states.

For example, California’s top rate is 13.3% and applies at much lower income levels than Hawaii’s. Hawaii’s income brackets reach the top rate at $200,000 for single filers, while California hits 13.3% at only $62,982 for joint filers.

Hawaii also stands out for having relatively low property taxes and no general sales tax. This offsets some of the individual income tax burden, especially for lower and middle income residents.

General Excise Tax (GET) in Hawaii

What is Hawaii’s GET?

The General Excise Tax (GET) is a gross receipts tax that is levied on the business activity of selling goods and services in Hawaii. It applies to virtually all transactions in the state, with a few exceptions.

The GET is collected by businesses from their customers and then remitted to the Hawaii Department of Taxation.

The GET differs from a sales tax in an important way – instead of being charged only at the final point of purchase by consumers, it is charged multiple times on goods and services as they move through different stages of production and distribution.

This makes the GET an extremely important source of state tax revenue in Hawaii.

What Transactions are Subject to GET?

Virtually all business transactions in Hawaii are subject to GET, with a few exceptions. This includes:

• Sales of tangible personal property (goods)
• Leasing or renting of tangible personal property
• Providing services
• Commissions
• Contracting (construction, repairs, jobs)

Some exceptions to GET include:

• Wholesale transactions for resale
• Sales of real property (land and buildings)
• Professional services such as medical, dental and legal
• Most insurance commissions

GET Rates on Oahu and Other Islands

Hawaii has a base GET rate of 4% that applies to most transactions, including goods, services, commissions, etc. However, the total GET rate paid by consumers varies by island:

In addition, Honolulu applies another 0.5% surcharge to transactions on Oahu, bringing the total GET rate there to 4.712%. The neighbor island counties may also have a smaller district surcharge that applies only to transactions in that district.

Real Property Tax in Hawaii

How Property Taxes Are Calculated

Property taxes in Hawaii are calculated by multiplying the assessed value of a property by the tax rate. The assessed value is determined by the county tax assessor and is generally based on the property’s market value.

Hawaii has relatively low property tax rates compared to other states, ranging from about 0.27% to 0.35% depending on the county.

There are some exemptions available that can reduce the taxable value of a property. For example, homeowners may qualify for a home exemption that reduces the assessed value by a certain amount before calculating property taxes. We’ll discuss exemptions more below.

Property Tax Exemptions in Hawaii

Hawaii offers several property tax exemptions that can help reduce the tax burden:

• Home exemption: Reduces assessed value by $200,000 before calculating property taxes.
• Low income exemption: Reduces taxes for low income owner-occupants meeting certain criteria.
• Totally disabled veterans: Full exemption on primary residence.
• Hansen’s disease patients exemption: Full exemption if meeting residency and income criteria.

In addition, some counties offer exemptions or tax credits for homeowners doing improvements supporting sustainability, renewable energy, accessibility modifications, or agricultural enhancements on their property.

Be sure to check with your county office to see what exemptions may apply to your situation.

Average Property Tax Rates by County

Property tax rates vary by Hawaii’s four counties. Here are the average rates levied in recent years:

So if you owned a $500,000 home in Maui county, your estimated annual property tax would be $500,000 x 0.34% = $1,700.

While Hawaii’s beautiful beaches and weather come at a cost for home prices and rents, at least the property tax rates are on the low side compared to most other states! You can get more details on property taxes for your Hawaii county here.

Fuel Taxes in Hawaii

State Fuel Tax Rates

The state of Hawaii has one of the highest fuel tax rates in the United States. As of 2023, Hawaii’s state gas tax is 17 cents per gallon and the state diesel tax is 17 cents per gallon. These rates have not changed since 2011, when there was a $0.05 per gallon increase approved by the state legislature.

County Fuel Taxes

In addition to the state fuel tax, individual counties in Hawaii charge their own fuel taxes. Here’s a breakdown of county fuel tax rates in Hawaii as of 2023:

• Honolulu County – 16.5 cents per gallon
• Hawaii County – 8.8 cents per gallon
• Maui County – 16 cents per gallon
• Kauai County – 17 cents per gallon

So fuel tax rates can vary considerably depending on which Hawaii county you are purchasing fuel in. For example, the total gas tax paid in Kauai County is much higher at 34 cents per gallon compared to 25.8 cents per gallon in Hawaii County.

Total Gas Taxes

When you combine the state and county fuel tax rates, Hawaii has the highest total gas tax out of any state. Below is a summary of the approximate total gas taxes paid at the pump as of 2023 for each county in Hawaii:

As the table shows, Honolulu, Maui and Kauai counties have some of the highest total gas taxes in the entire United States, ranging from 33 to 34 cents per gallon. No wonder filling up your tank in Hawaii can be so expensive!

😲 But these taxes do help fund infrastructure, construction projects, and other government services in the state.

Reducing Your Hawaii Taxes

Maximize Tax Deductions and Credits

Hawaii offers some valuable tax deductions and credits that can help residents significantly reduce their tax liability. Here are some top ways to maximize tax savings:

• Contribute to a 529 college savings plan – contributions are tax-deductible up to $5,000 for individuals and $10,000 for married couples filing jointly
• Make energy conservation improvements to your home – tax credits cover 40% of costs, up to $2,000
• Install a solar water heater system – get 35% of the cost back, up to $2,250
• Donate to Hawaii charities – deduct up to 60% of your federal AGI

Consult with a local CPA to identify all deductions and credits you may qualify for. Software like TurboTax can also help uncover tax savings you can claim.

Explore Exemptions From GET and Property Tax

Hawaii offers certain exemptions from general excise tax (GET) and real property tax that you may benefit from:

• Seniors may qualify for GET exemption on certain sales and exemptions on property values up to $120,000
• People with disabilities can potentially get full exemption from real property tax
• Certain non-profits in Hawaii are exempt from paying GET

Carefully review eligibility rules to see if you or your organization can be exempted from paying some or all of these state taxes.

Consider Establishing Residency Elsewhere

Hawaii is notorious for having very high taxes compared to other states. According to the Tax Foundation, Hawaii residents pay 11.16% of their income in state and local taxes – the highest rate in the nation!

If the tax burden is too high, some residents consider establishing primary residency in another state. This may allow you to realize substantial state tax savings, but it requires meeting strict residency requirements.

Popular low-tax states like Florida, Texas and Washington require proof you live there most of the year. You’d need to register your car there, get a driver’s license, register to vote locally, and spend a majority of your time in the new home state.

It’s smart to consult with legal and tax experts before attempting to change residency. Make sure you understand all rules and financial implications first.

Conclusion

As you can see, taxes in Hawaii add up through income taxes, general excise taxes, property taxes, and more. Understanding the full tax burden is crucial when considering a move or buying property there.

While Hawaii’s picturesque landscape comes at a premium tax price, some strategic planning around deductions, exemptions, credits, and establishing residency can help lower your tax payment obligations.

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