What pensions can I subtract from my Hawaii income?
Hawaii does not tax qualifying distributions from an employer-funded pension plan. The federally taxable amount is generally found in Box 2a of your 1099-R. Make sure the distribution meets the qualifications below before claiming the subtraction.
If you received qualifying distributions from an employer-funded profit sharing, defined contribution, defined benefit plan, or from a government retirement system (e.g., federal civil service, military pension, state or county retirement system), enter the qualifying amount.
For a distribution to qualify, it must be paid by a pension by reason of retirement, disability, or death. The following three types of distributions are not taxed by Hawaii and can be subtracted:
- Pension or annuity distributions from a public (i.e., government) retirement system (e.g., federal civil service annuity, military pension, state or county retirement system), unless voluntary contributions were made by an employee under an elective right.
- Distributions from a private employer pension plan received upon retirement (including early retirement and disability retirement) if the employee did not contribute to the pension plan.
- Distributions from a pension plan at age 70-1/2 that are made to comply with the federal mandatory payout rule do qualify as a retirement payment whether or not the employee is still working full time.
Distributions from a private employer pension plan received upon retirement are partially taxed by Hawaii if the employee contributed to the pension plan. Early distributions from a pension plan that are subject to the 10% federal penalty tax do not qualify and should not be subtracted.
Note: A rollover IRA is treated as a continuation of the original plan that provided the money that is rolled over. If distributions from the
original plan would be characterized as a qualified distribution, distributions out of the rollover IRA are exempt from Hawaii's income tax as well.
