Questions & Answers

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:

  1. 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.
  2. 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.
  3. 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.

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