TAX BURDEN for HAWAII RETIREES: Many people planning to retire use the presence or absence of a state income tax as a litmus test for a retirement destination. This is a serious miscalculation since higher sales and property taxes can more than offset the lack of a state income tax. The lack of a state income tax doesnt necessarily ensure a low total tax burden. Following are the taxes you can expect to pay if you retire in Hawaii:
State Sales Tax: (General Excise Tax) 4% (prescription drugs exempt) Oahu has a county surcharge tax of 1/2% to pay for a mass transit system.
Fuel & Cigarette Tax:
Gasoline Tax: 33.6 cents/gallon
Diesel Fuel Tax: 46.6 cents/gallon
Cigarette Tax: $2.02/pack of 20
Personal Income Taxes:
Tax Rate Range: Low - 1.4%; High - 8.25%. The state has adopted a measure temporarily creating three new state income tax brackets. Beginning in tax year 2009, for married couples the rates will be 9 percent on income between $300,000 and $350,000; 10 percent between $350,000 and $400,000; and 11 percent rate for income above $400,000. Additionally, the state's standard deduction and the personal exemption were each raised by 10 percent, which will lower tax bills for low- and moderate-income families. All of these changes are set to expire after tax year 2015. Hawaii's previous top tax rate was 8.25 percent on all income over $96,000.
Number of Brackets: 9 (Lowest - $2400; Highest - $48,000).
Personal Exemptions: Single - $1,040; Married - $2,080; Dependents - $1,040. Exemptions increase to $1,144, $2,288 and $1,144, respectively, beginning in January 2011. Changes will be repealed on 31 DEC 15. There is an additional exemption for those over age 65. Currently, if you are blind, deaf or totally disabled and your impairment has been certified, you can claim a disability exemption of $7,000 in lieu of the $1,040 personal exemption amount.
Standard Deduction: Single - $2,000; Married filing joint return - $4,000; Head of Household - $2,950. Beginning 1 JAN 11 the numbers are $2,200, $4,400, and $3,212, respectively. Changes will be repealed on 31 DEC 15.
Medical/Dental Deduction: Same as Federal taxes
Federal Income Tax Deduction: None
Retirement Income Taxes: Social Security, military, federal, state/local, and some private pensions are exempt. All out-of-state government pensions are exempt.
Retired Military Pay: Not taxed.
Military Disability Retired Pay: Retirees who entered the military before 24 SEP 74, and members receiving disability retirements based on combat injuries or who could receive disability payments from the VA are covered by laws giving disability broad exemption from federal income tax. Most military retired pay based on service-related disabilities also is free from federal income tax, but there is no guarantee of total protection.
VA Disability Dependency and Indemnity Compensation: VA benefits are not taxable because they generally are for disabilities and are not subject to federal or state taxes.
Military SBP/SSBP/RCSBP/RSFPP: Generally subject to state taxes for those states with income tax. Check with state department of revenue office.
Property Taxes - Personal property such as cars or boats are not subject to property tax. Real property and land are assessed at 100% "fair market value." Taxes are administered by the four counties. The homestead exemption is $12,000, but is $40,000 in the city and county of Honolulu. Persons 60 to 69 years of age may claim double the homestead exemption, and a person age 70 or older, may claim 2.5 times the homestead exemption. In the city and county of Honolulu, the exemptions are: 55-59 years, 1.5 times the exemption amount; 60-64 years, 2.0 times; 65-69, 2.5 times, and 70 and older, 3.0 times. Homeowners 55 and older are exempt from property taxes on $60,000 to $120,000 (amount depends on owner's age) of the assessed value of their residence, regardless of income. They must pay at least $100 in taxes, however. Homeowners 55 and older who earn less than $20,000 are also eligible for a tax credit of up to $500. Call 808-587-4343 for details.
Inheritance and Estate Taxes - There is no inheritance tax and only a limited estate tax related to federal estate tax collection.
For further information, refer to the Hawaii Department of Taxation site www.state.hi.us/tax/tax.html
or call 800-222-3229 or 808-587-4242.
Sep 09 ++]