Overview of Hawaii Taxes
Residents of the beautiful volcanic islands of Hawaii are subject to a variable income tax system that features 12 tax brackets. Rates range from 1.40% to 11.00%. Luckily, Hawaiians don’t have to pay any local taxes.
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Hawaii Paycheck Calculator
Hawaii Paycheck Quick Facts
- Hawaii income tax rate: 1.40% - 11.00%
- Median household income: $94,814 (U.S. Census Bureau)
- Number of cities that have local income taxes: 0
How Your Hawaii Paycheck Works
Hawaii employers are responsible for withholding FICA taxes - 1.45% of your earnings for Medicare taxes and 6.2% for Social Security. Your employer will then match these amounts, so the total contributions are double what you get paid.
Any earnings that exceed a certain threshold are subject to an additional 0.9% in Medicare taxes, which your employer will not match. Individuals making over $200,000, joint filers earning more than $250,000 and married individuals filing separately with income above $125,000 pay the surtax.
If you are self-employed you must pay the total 2.9% in Medicare taxes and 12.4% in Social Security yourself. Fortunately, there is a deduction available to help self-employed people recoup some of that money.
In addition to FICA taxes, federal income taxes are withheld from each of your paychecks and sent to the IRS. This money goes toward your annual income taxes. How much your employer withholds in federal income taxes depends on the information you provide on your W-4 form. You need to fill out a new W-4 every time you start a new job.
There are a few changes that the IRS made to the W-4 in recent years. Instead of asking you to list total allowances, the new W-4 uses a five-step process that allows filers to enter personal information, claim dependents and indicate any additional income and jobs. Filers also have to enter annual dollar amounts for things like income tax credits, non-wage income, itemized and other deductions and total annual taxable wages. These updates will primarily affect those adjusting their withholdings or switching jobs.
One factor that affects how much is withheld from your pay is your marital status and whether or not you’re filing separately from your spouse. Having dependents also affects the amount you pay for your bill come tax season.
The frequency of your paycheck will also affect its size. If you are paid once a month, your paycheck will be bigger than if you are paid bi-weekly. If you’re paid bi-weekly, that might also make it easier to budget as you have money coming in a couple times a month.
Another factor that affects your take-home pay is whether or not you make any pre-tax contributions. This is money that comes out of your pay before income tax does. Common pre-tax contributions include a health savings account (HSA), retirement accounts like a 401(k) or commuter benefits.
Finally, if you pay for health insurance for you, your spouse and/or your children through your employer, that money will come out of your paycheck.
Residents of the Aloha State face 12 total tax brackets and rates that are based on their income level. Single filers and married people filing separately pay rates ranging from 1.40% on their first $2,400 of taxable income up to 11.00% on income over $200,000. The tax rates are the same for couples filing jointly, but the income brackets are doubled. Hawaii doesn’t charge any local taxes.
If you’re a part of the U.S. Coast Guard, Marine Corps, Air Force, Navy, Army Reserve or Hawaii National Guard, you’re exempt from paying taxes on the first $7,345 you earn. If you decide to file jointly and your spouse also qualifies, then your exclusion doubles.
A financial advisor can help you understand how taxes fit into your overall financial goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Looking to relocate and purchase a property in Hawaii? Check out our Hawaii mortgage guide to understand mortgages and mortgage rates before making the move.
How You Can Affect Your Hawaii Paycheck
If you consistently find yourself paying a lot in taxes come April, you can ask your employer to withhold a dollar amount from each of your paychecks to right-size your withholding. If you are paying a lot in taxes, you may also want to consider upping your contribution to retirement accounts like a 401(k) where your money can grow tax-free. Not only will you be saving more for retirement, but since this money comes out of your paycheck before taxes are withheld, you can actually lower your taxable income and, if you’re lucky, decrease how much you owe in taxes.
Conversely, if you tend to get a huge tax refund, you may want to adjust your withholding in the other direction. Some may consider a big tax refund a good thing, but others might argue you could have used that money to do other things throughout the year. It’s worth decreasing your dollar withholdings on your W-4 form if you pay too much in taxes throughout the year.
