Hawaii Veteran Benefits 2025: Property Tax Exemption, Income Tax & Financial Reality

Hawaii offers veterans complete state income tax exemption on military retirement pay and full property tax exemption for 100% disabled veterans. But Hawaii also delivers the highest cost of living in the United States - groceries cost 50% more than the mainland, median home prices exceed $1 million on Oahu, and utilities run double the national average.

The tax benefits are real. The paradise is real. The financial challenge of actually affording Hawaii on military retirement income is also very real.

This guide breaks down exactly what Hawaii offers veterans and what it actually costs to live here.

Bottom Line Up Front

Here's what Hawaii offers veterans:

State income tax on military retirement: 0% - completely exempt
Property tax exemption for 100% disabled veterans: Full exemption (pay only $300 minimum tax annually)
Property tax exemption for <100% disabled: None - no partial exemptions
Sales tax: None - Hawaii has no state or local sales tax
Hawaii state income tax rates: 1.4% - 11% (among highest in nation, but military retirement exempt)
Vehicle registration: Discounts available for disabled veterans

Potential annual savings for 100% P&T disabled veteran: $3,000-$12,000+ in property taxes (depending on home value), plus state income tax savings on military retirement

Reality check: Hawaii's cost of living is 77-90% above the national average. A gallon of milk costs $6-$8. Median home prices on Oahu exceed $1.2 million. Unless you're earning $100K+, have VA disability compensation, or prioritize paradise over finances, you'll struggle financially.

Income Tax Treatment for Veterans

Military Retirement Pay - 100% Exempt

Hawaii completely exempts military retirement pay from state income tax. This has been the case since the exemption was established, making Hawaii one of the most tax-friendly states for military retirees.

What this means:

Military retirement pay: 100% exempt from state tax
VA disability compensation: Tax-free (federally and state)
Civilian employment income: Taxable at Hawaii rates (1.4% - 11%)
Investment income: Taxable at Hawaii rates
Social Security: Partially taxable (depends on income level)

Example: An E-8 with 20 years receiving $35,000 annual military retirement pays $0 Hawaii state income tax on that retirement income.

Comparison to mainland: If that same retiree lived in California (tax rate ~6%), they'd pay ~$2,100 annually in state tax. In Oregon (~9%), ~$3,150 annually. Hawaii saves military retirees substantial money on this alone.

Hawaii State Income Tax Rates (2025)

Hawaii has some of the highest state income tax rates in the nation - but they don't apply to military retirement.

Tax brackets for married filing jointly:

Taxable Income	Tax Rate
$0 - $4,800	1.4%
$4,800 - $9,600	3.2%
$9,600 - $19,200	5.5%
$19,200 - $28,800	6.4%
$28,800 - $38,400	6.8%
$38,400 - $57,600	7.2%
$57,600 - $76,800	7.6%
$76,800 - $96,000	7.9%
$96,000 - $384,000	8.25%
$384,000+	11.0%

Single filers have lower thresholds but same rates.

Why this matters: If you work a civilian job in Hawaii earning $60,000, you'll pay approximately $3,300 in state income tax. But your military retirement is completely exempt. This exemption becomes more valuable as Hawaii's tax rates increase with income.

Other Retirement Income

Public and private pension income: Also exempt from Hawaii state income tax

401(k) and IRA withdrawals: Fully taxable at Hawaii income tax rates

Social Security benefits: Partially taxable depending on income level (follows federal rules)

Investment income: Fully taxable

The strategy: If you're living in Hawaii on retirement income, maximize military pension and Social Security (partially exempt), minimize 401(k)/IRA withdrawals (fully taxable).

Federal Income Tax Still Applies

Hawaii's state tax exemption doesn't change federal obligations. You still owe federal income tax on military retirement pay unless it qualifies for Combat-Related Special Compensation (CRSC) or other federal exemptions.

Property Tax Exemptions for Veterans

100% Disabled Veterans - Complete Exemption

Veterans rated 100% disabled by the VA qualify for full property tax exemption on their primary residence. You pay only a $300 minimum tax annually, regardless of home value.

How it works:

Exemption applies to your primary residence only
Home can be any value - $500K, $1M, $2M - exemption covers it all
Must be rated 100% disabled (P&T or not doesn't matter)
Exemption varies slightly by county but all four Hawaii counties offer full exemption for 100% disabled veterans
One-time application - no annual renewal required (unless you move)

Real-World Examples by County

Honolulu County (Oahu)

Home market value: $1,200,000 (median single-family home)
Assessed value: $1,200,000
Homeowner exemption: $120,000
Net taxable value without veteran exemption: $1,080,000
Property tax rate: $3.50 per $1,000
Without veteran exemption: $3,780 annually
With 100% disabled veteran exemption: $300 annually (minimum tax)
Annual savings: $3,480

Home value: $800,000 (condo)

Net taxable value without veteran exemption: $680,000
Without veteran exemption: $2,380 annually
With 100% disabled veteran exemption: $300 annually
Annual savings: $2,080

Maui County

Home market value: $1,500,000
Homeowner exemption: $200,000 (highest in state)
Net taxable value without veteran exemption: $1,300,000
Property tax rate: ~$5.50 per $1,000 (residential)
Without veteran exemption: $7,150 annually
With 100% disabled veteran exemption: $300 annually
Annual savings: $6,850

Hawaii County (Big Island)

Home market value: $700,000 (more affordable than Oahu/Maui)
Homeowner exemption: $40,000
Net taxable value without veteran exemption: $660,000
Property tax rate: $11.10 per $1,000 (residential)
Without veteran exemption: $7,326 annually
With 100% disabled veteran exemption: $300 annually
Annual savings: $7,026

Kauai County

Home market value: $1,000,000
Homeowner exemption: $160,000
Net taxable value without veteran exemption: $840,000
Property tax rate: ~$5.50 per $1,000
Without veteran exemption: $4,620 annually
With 100% disabled veteran exemption: $300 annually
Annual savings: $4,320

Disability Ratings Below 100% - No Exemption

Unlike many states that offer graduated exemptions (e.g., partial exemptions at 50%, 70%), Hawaii's property tax exemption is binary:

100% disabled: Full exemption (pay only $300)
90% or lower: No exemption whatsoever

If you're rated 90%, 70%, 50%, or any percentage below 100%, you receive no property tax benefit from your VA disability rating in Hawaii. You pay full property taxes like any other homeowner (minus the standard homeowner exemption available to all residents).

Why this matters: If you're rated 90% and hoping to save on property taxes, you won't. Hawaii doesn't offer partial exemptions. The only benefit is the military retirement income tax exemption.

Surviving Spouses

A surviving spouse of a 100% disabled veteran who remains unmarried and continues to own and occupy the home can claim the full property tax exemption.

Requirements:

Must be unmarried (exemption ends upon remarriage)
Must own the property
Must occupy as primary residence
Must file claim with county real property tax office

This benefit can save surviving spouses thousands of dollars annually and help them afford to remain in their homes.

Homeowner Exemptions (All Residents)

Hawaii counties offer homeowner exemptions to all owner-occupants, not just veterans:

County	Homeowner Exemption
Honolulu (Oahu)	$120,000
Maui	$200,000
Hawaii (Big Island)	$40,000
Kauai	$160,000

These exemptions reduce assessed value for all homeowners. Veterans who don't qualify for the 100% disabled exemption still benefit from these standard exemptions.

Example: Non-disabled veteran on Oahu with $1M home

Assessed value: $1,000,000
Homeowner exemption: $120,000
Taxable value: $880,000
Tax rate: $3.50 per $1,000
Annual property tax: $3,080

Property Tax Rates by County (2025)

Hawaii's property tax rates are expressed per $1,000 of net taxable assessed value and vary by county and property classification.

Honolulu County (Oahu)

Property Class	Rate per $1,000
Residential	$3.50
Homeowner (owner-occupied)	$3.50
Hotel/Resort	$13.90
Commercial	$12.40

Home exemption: $120,000

Maui County

Property Class	Rate per $1,000
Owner-Occupied (Homeowner)	$3.03 - $5.50 (tiered)
Non-Owner-Occupied Residential	Higher tiered rates
Hotel/Resort	$11.85

Home exemption: $200,000 (highest in state)

Hawaii County (Big Island)

Property Class	Rate per $1,000
Homeowner	$5.95
Residential	$11.10
Resort/Hotel	$12.35

Home exemption: $40,000

Kauai County

Property Class	Rate per $1,000
Owner-Occupied	$2.59 - higher tiers
Non-Owner-Occupied	Tiered rates

Home exemption: $160,000

Key insight: Maui has the highest homeowner exemption ($200K) but also high property values. Big Island has lower property values but higher tax rates. Oahu has moderate rates but astronomical home prices.

No Sales Tax - Rare Benefit

Hawaii has no state or local sales tax. This makes Hawaii one of only five states without a general sales tax (along with Alaska, Delaware, Montana, New Hampshire, and Oregon).

However, Hawaii has a General Excise Tax (GET) that functions similarly:

4% on most goods and services
4.5% on wholesale and manufacturing
Businesses pay the tax, but usually pass it to consumers
Not technically a "sales tax" but feels like one

For veterans: No special exemptions from GET. You pay the same rate as all residents and visitors.

Practical impact: You'll see prices slightly higher due to GET, but Hawaii's lack of traditional sales tax means you're not paying 7-10% on every purchase like many mainland states.

Vehicle Registration and Licensing

Disabled Veterans

Hawaii offers vehicle registration fee exemptions and reduced fees for disabled veterans, though specifics vary by disability rating and vehicle type.

Who qualifies:

Service-connected disabled veterans
Exact benefits vary by county

How to apply: Contact your county's Department of Motor Vehicles with VA rating letter and DD-214.

Honolulu County DMV: (808) 768-4325

Disabled Parking Placards

Veterans rated permanently disabled by the VA qualify for disabled parking placards or license plates.

Application: DMV with physician certification or VA documentation

No fee: Hawaii does not charge for disabled parking placards

Cost of Living Reality Check

Hawaii's tax benefits for veterans are substantial. But they're overwhelmed by the highest cost of living in the United States.

Hawaii Cost of Living Index: 184

What this means: Living in Hawaii costs 84% more than the U.S. average.

Comparison: If your expenses on the mainland are $3,000/month, expect to pay $5,520/month in Hawaii for equivalent lifestyle.

Housing Costs (2025)

Oahu (Honolulu County):

Median single-family home: $1,175,000 - $1,192,500 (record high)
Median condo: $496,500 - $536,000
Rent (1BR apartment): $1,800 - $2,500/month
Rent (2BR apartment): $2,200 - $3,200/month
Rent (3BR house): $3,200 - $5,000+/month

Maui County:

Median home: $1,100,000 - $1,500,000
Rent (2BR): $2,800 - $4,000+/month

Hawaii County (Big Island):

Median home: $700,000 - $950,000 (most "affordable")
Hilo side cheaper than Kona side (same house costs 2x more on sunny Kona side)
Rent (2BR): $1,500 - $2,500/month

Kauai County:

Median home: $900,000 - $1,300,000
Rent (2BR): $2,000 - $3,000/month

Reality: Even with 100% property tax exemption, you still need to afford the mortgage or rent. Saving $3,000-$7,000 annually on property taxes doesn't help much when homes cost $1 million+.

Groceries: 50-56% Above National Average

Real costs (Honolulu, 2025):

Gallon of milk: $6.29 - $8.00
Dozen eggs: $5.50 - $7.00
Loaf of bread: $5.50 - $7.00
Pound of ground beef: $8.50 - $11.00
Gallon of gas: $4.40 - $4.80
Pound of chicken breast: $8.00 - $10.00

Why so expensive?: Nearly everything is shipped 2,500 miles from the mainland. The Jones Act requires goods shipped between U.S. ports to use U.S.-flagged ships with U.S. crews, dramatically increasing shipping costs.

Monthly grocery bill:

Single person: $600 - $800
Family of four: $1,400 - $2,000

Compare this to mainland: $400 (single), $1,000 (family).

Utilities: 100% Above National Average

Electricity: Hawaii has the highest electricity rates in the United States

Average rate: $0.42 per kWh (2025)
National average: $0.17 per kWh
Hawaii costs 2.5x more than mainland

Monthly electricity bill:

Small apartment (600 sq ft): $150 - $200
House (1,500 sq ft): $250 - $400
House with AC (not common): $400 - $600+

Why so expensive?: Hawaii generates most electricity from imported petroleum. Solar is growing but still expensive to install.

Water: Varies by island

Oahu: $50 - $100/month typical
Outer islands: Can be higher

Internet/Phone: Similar to mainland ($60 - $120/month)

Transportation

Gas: $4.40 - $4.80/gallon (2025)

Highest in U.S. except California

Car insurance: 10-30% higher than mainland average

Limited competition, island isolation

Vehicle shipping: $1,000 - $2,000 per vehicle from West Coast

Many military members ship vehicles when PCSing

Healthcare

Healthcare costs: 28-35% above national average

Doctor visits: $150 - $250
Specialist visits: $200 - $400
Emergency room: $1,500 - $5,000+

VA healthcare: Available at no cost for eligible veterans (see companion guide on Hawaii VA facilities)

Health insurance: Premiums 20-30% higher than mainland

Financial Impact Analysis: Can You Actually Afford Hawaii?

Let's calculate real financial scenarios for veterans considering Hawaii.

Scenario 1: E-8 Retiree, 20 Years Service, 100% P&T Disabled

Annual income:

Military retirement: $35,000 (state tax exempt)
VA disability (100% P&T): $44,844 (tax-free)
Total: $79,844

Hawaii 20-Year Financial Impact

Benefit	Annual Savings	20-Year Total
No state income tax on $35K retirement	$2,800 (vs 8% avg state)	$56,000
Property tax exemption (Oahu $1M home)	$3,400	$68,000
TOTAL SAVINGS	$6,200	$124,000

The Cost Reality

Annual increased costs vs. national average (family lifestyle):

Housing (rent or mortgage): +$24,000/year ($2,000/month more)
Groceries: +$4,800/year
Utilities: +$2,400/year
Transportation: +$1,800/year
Healthcare (with VA): +$1,000/year
Total increased costs: +$34,000/year

Net position: Saving $6,200/year on taxes, spending $34,000/year more to live in Hawaii

Bottom line: You're $27,800/year in the hole compared to living in an average-cost mainland state.

Can This Veteran Afford Hawaii?

Total income: $79,844 After increased Hawaii costs: Effective buying power of ~$52,000

Feasibility:

If you own home outright: Possible but tight
If you're paying rent ($2,500/month): Extremely difficult
If you're paying mortgage on $1M home: Nearly impossible without additional income

Reality check: Most military retirees with 100% VA disability cannot afford Hawaii on retirement income alone unless they:

Already own a home outright (no mortgage)
Have substantial savings
Have working spouse with six-figure income
Have additional income sources

Scenario 2: O-5 Retiree, 20 Years, 70% Disabled

Annual income:

Military retirement: $55,000 (state tax exempt)
VA disability (70%): $18,000 (tax-free)
Civilian job: $85,000 (state taxable)
Total: $158,000

Tax impact:

Hawaii state tax on $85K civilian income: ~$6,800
Savings from military retirement exemption: ~$4,400 (vs 8% state tax)
Property tax: $3,400 (no veteran exemption at 70%)

Hawaii increased costs: +$34,000/year (same as above)

Net position:

Income: $158,000
After increased costs: Effective $124,000
After taxes: ~$108,000 take-home

Feasibility: Possible - This income level can afford Hawaii, especially if property tax exemption were available. But without 100% rating, property taxes remain a significant burden ($3,400/year on Oahu).

Scenario 3: E-6 Retiree, 20 Years, 50% Disabled, Working Spouse

Annual income:

Military retirement: $28,000 (state tax exempt)
VA disability (50%): $11,000 (tax-free)
Veteran's job: $50,000 (state taxable)
Spouse's job: $50,000 (state taxable)
Total: $139,000

Tax impact:

Hawaii state tax on $100K combined civilian income: ~$8,000
Savings from military retirement exemption: ~$2,240
Property tax: $3,400 (no exemption at 50%)

Net position:

Gross income: $139,000
After increased Hawaii costs: Effective $105,000
After taxes: ~$93,000 take-home

Feasibility: Tight but possible with dual income and financial discipline. Requires both spouses working to afford Hawaii lifestyle.

Who Can Afford Hawaii Financially?

You can likely afford Hawaii if:

Combined household income $120K+ with both spouses working
You're 100% P&T disabled with home paid off
You work high-paying job ($100K+) in addition to retirement
You have substantial retirement savings/investments
You're willing to live frugally (small condo, minimal dining out, used car, no luxuries)

You likely cannot afford Hawaii if:

You're retiring on E-7 or below military retirement alone
You have no disability rating or <70%
You're single income with dependents
You expect to maintain mainland lifestyle on retirement income
You need to finance a home (mortgage on $1M+ home is $5,000+/month)

The Brutal Math

Income needed to live comfortably in Hawaii (family of 4):

Conservative estimate: $100,000 - $120,000
Comfortable estimate: $150,000 - $180,000
With mortgage on $1M home: $180,000 - $200,000+

Median household income in Hawaii: $88,000

Below the "comfortable" threshold

Most military retirees earn: $30,000 - $50,000 military retirement + VA disability

Well below the threshold without additional employment

Conclusion: The math doesn't work for most military retirees unless you have substantial additional income, 100% disability with paid-off home, or significant savings.

How to Claim Your Benefits

Property Tax Exemption (100% Disabled Veterans)

Timeline: Apply with your county real property tax office as soon as you establish Hawaii residency and receive your 100% VA rating.

Required documents:

VA rating decision letter showing 100% disability rating
Hawaii driver's license or state ID
Property deed or mortgage documents
DD-214 (Certificate of Release or Discharge from Active Duty)
Completed exemption form (varies by county)

Where to apply:

Honolulu County (Oahu)

Real Property Assessment Division: (808) 768-3799
Address: 842 Bethel Street, Honolulu, HI 96813
Form: Form E-8-10.5 (Exemption for Homes of Totally Disabled Veterans)
Website: realproperty.honolulu.gov

Maui County

Real Property Tax Division: (808) 270-7297
Address: 70 East Kaahumanu Avenue, Suite A-18, Kahului, HI 96732
Website: mauicounty.gov/rpt

Hawaii County (Big Island)

Real Property Tax Office: (808) 961-8201
Address: 101 Pauahi Street, Suite 4, Hilo, HI 96720
Website: hawaiipropertytax.com

Kauai County

Real Property Division: (808) 241-4224
Address: 4444 Rice Street, Suite 463, Lihue, HI 96766
Website: kauai.gov/RealProperty

Processing time: 30-90 days typically

Annual renewal: Not required once approved. This is a "one-and-done" exemption. You must notify the county if you move or your circumstances change.

State Income Tax Exemption (Military Retirement)

No application required. When filing your Hawaii state income tax return (Form N-11), military retirement pay is automatically excluded from taxable income.

How to file:

Online: hitax.hawaii.gov
Hawaii Department of Taxation: (808) 587-4242
Mail: P.O. Box 3559, Honolulu, HI 96811-3559

When filing: Report military retirement pay on your federal return (Form 1040) but exclude it from Hawaii state return

Tax software: Most tax software (TurboTax, H&R Block, TaxAct) automatically handles Hawaii's military retirement exemption

Vehicle Registration (Disabled Veterans)

Where: County Department of Motor Vehicles

Honolulu DMV

Phone: (808) 768-4325
Address: 530 South King Street, Honolulu, HI 96813

Documents needed:

VA rating letter
Hawaii driver's license
Vehicle title/registration
DD-214

Processing: Same-day for registration, 2-4 weeks for special plates

Frequently Asked Questions

Does Hawaii tax military retirement pay?

No. Hawaii completely exempts military retirement pay from state income tax. You owe $0 state tax on military retirement regardless of the amount.

Can I get the property tax exemption if I'm rated 90%?

No. Hawaii's property tax exemption requires a 100% disability rating. At 90% or below, you receive no property tax exemption benefit. Hawaii doesn't offer partial exemptions like some states.

What if I'm 100% P&T but it's Individual Unemployability (IU)?

The Hawaii property tax exemption applies to 100% disability ratings regardless of whether it's P&T, IU, or temporary. As long as the VA rates you 100%, you qualify.

Is the property tax exemption the same on every island?

Essentially yes, though minor administrative differences exist between counties. All four counties (Honolulu, Maui, Hawaii, Kauai) offer full property tax exemption for 100% disabled veterans with only the $300 minimum tax.

Can I afford Hawaii on military retirement alone?

Honest answer: Probably not, unless you're an O-5+ retiree with substantial savings and a paid-off home. The math is brutal. Plan on needing $100K-$150K+ total household income to live comfortably in Hawaii.

Does Hawaii have sales tax?

No traditional sales tax, but Hawaii has a 4% General Excise Tax (GET) that businesses pay and usually pass to consumers. It functions similarly to sales tax but is technically different.

Can I stack the homeowner exemption and veteran exemption?

No. The 100% disabled veteran exemption replaces the standard homeowner exemption (which only reduces assessed value by $40K-$200K depending on county). You get the veteran exemption, which is far more valuable (full exemption vs. partial).

What if I move from Oahu to Maui?

You must reapply for the property tax exemption in your new county. The exemption doesn't automatically transfer between counties.

Can my surviving spouse keep the exemption?

Yes, if they remain unmarried and continue to own and occupy the home as their primary residence. The exemption ends upon remarriage or if they move.

Is VA disability compensation taxable in Hawaii?

No. VA disability compensation is tax-free at both federal and state levels.

How much do I really need to earn to live in Hawaii?

Realistic minimums:

Single person: $80,000 - $100,000
Family: $120,000 - $150,000
Comfortable family lifestyle with home: $150,000 - $200,000+

These figures assume you're paying rent or mortgage. If you own outright, reduce by $30K-$50K.

Should I move to Hawaii as a veteran?

Come to Hawaii if:

You're stationed here and love it
You have high-paying job lined up ($100K+)
You're 100% P&T with substantial savings
You value paradise lifestyle over financial optimization
You have dual high income household

Don't come to Hawaii if:

You expect to live on E-6 or E-7 retirement alone
You have no job prospects or savings
You're <100% disabled (no property tax benefit)
You prioritize financial security over lifestyle

Can I use a VA loan to buy in Hawaii?

Yes. VA loans work in Hawaii with no down payment required for eligible veterans. However, Hawaii's high home prices ($1M+ on Oahu) mean your monthly mortgage payment will be $5,000-$7,000+ even with 0% down. Ensure you can afford the payment.

Is Hawaii really worth it for veterans?

Financially? No, for most veterans. The tax benefits don't offset the cost of living.

Lifestyle? That's personal. Hawaii offers year-round perfect weather, unmatched natural beauty, outdoor recreation, diverse culture, and a strong military/veteran community. Many veterans choose Hawaii despite the costs because paradise is worth it to them.

Come for the lifestyle, not the money.

Key Takeaways

Military retirement pay is 100% state tax exempt - this is Hawaii's biggest veteran financial benefit
100% disabled veterans get full property tax exemption - saving $3,000 - $7,000+ annually depending on home value
No exemptions for <100% disabled - if you're 90% or below, you get no property tax benefit
Hawaii's cost of living is catastrophic - 84% above national average, driven by housing ($1M+ homes), groceries (+50%), and utilities (+100%)
Tax benefits don't offset living costs - saving $6,000/year on taxes while spending $34,000/year more to live here
You need $100K-$150K+ household income to live comfortably in Hawaii as a family
Most military retirees can't afford Hawaii on retirement income alone without additional employment, 100% disability, or substantial savings
Choose Hawaii for lifestyle, not finances - if you prioritize perfect weather, beaches, and outdoor living over money, Hawaii might be worth it

Hawaii offers real tax benefits to veterans. But they're overwhelmed by the highest cost of living in America. Run your personal numbers carefully before relocating.

Final recommendation: Visit Hawaii for 2-4 weeks (preferably winter to see rain) before committing to move here. Rent for a year before buying. Understand the financial reality before falling in love with paradise.

Resources

Hawaii Office of Veterans Services: (808) 433-0420 | dod.hawaii.gov/ovs
Honolulu Real Property Assessment: (808) 768-3799 | realproperty.honolulu.gov
Hawaii Department of Taxation: (808) 587-4242 | tax.hawaii.gov
VA Pacific Islands Healthcare: 1-800-214-1306 | va.gov/pacific-islands-health-care
County real property tax offices: Contact individual counties for specific exemption forms and requirements

Information current as of January 2025. Tax laws, property values, and benefit details may change. Verify specific details with your county real property tax office and the Hawaii Office of Veterans Services.

Hawaii Veteran Benefits 2025: Property Tax Exemption, Income Tax & Financial Reality

The tax benefits are real. The paradise is real. The financial challenge of actually affording Hawaii on military retirement income is also very real.

This guide breaks down exactly what Hawaii offers veterans and what it actually costs to live here.

Bottom Line Up Front

Here's what Hawaii offers veterans:

State income tax on military retirement: 0% - completely exempt
Property tax exemption for 100% disabled veterans: Full exemption (pay only $300 minimum tax annually)
Property tax exemption for <100% disabled: None - no partial exemptions
Sales tax: None - Hawaii has no state or local sales tax
Hawaii state income tax rates: 1.4% - 11% (among highest in nation, but military retirement exempt)
Vehicle registration: Discounts available for disabled veterans

Potential annual savings for 100% P&T disabled veteran: $3,000-$12,000+ in property taxes (depending on home value), plus state income tax savings on military retirement

Income Tax Treatment for Veterans

Military Retirement Pay - 100% Exempt

What this means:

Military retirement pay: 100% exempt from state tax
VA disability compensation: Tax-free (federally and state)
Civilian employment income: Taxable at Hawaii rates (1.4% - 11%)
Investment income: Taxable at Hawaii rates
Social Security: Partially taxable (depends on income level)

Example: An E-8 with 20 years receiving $35,000 annual military retirement pays $0 Hawaii state income tax on that retirement income.

Hawaii State Income Tax Rates (2025)

Hawaii has some of the highest state income tax rates in the nation - but they don't apply to military retirement.

Tax brackets for married filing jointly:

Taxable Income	Tax Rate
$0 - $4,800	1.4%
$4,800 - $9,600	3.2%
$9,600 - $19,200	5.5%
$19,200 - $28,800	6.4%
$28,800 - $38,400	6.8%
$38,400 - $57,600	7.2%
$57,600 - $76,800	7.6%
$76,800 - $96,000	7.9%
$96,000 - $384,000	8.25%
$384,000+	11.0%

Single filers have lower thresholds but same rates.

Other Retirement Income

Public and private pension income: Also exempt from Hawaii state income tax

401(k) and IRA withdrawals: Fully taxable at Hawaii income tax rates

Social Security benefits: Partially taxable depending on income level (follows federal rules)

Investment income: Fully taxable

The strategy: If you're living in Hawaii on retirement income, maximize military pension and Social Security (partially exempt), minimize 401(k)/IRA withdrawals (fully taxable).

Federal Income Tax Still Applies

Property Tax Exemptions for Veterans

100% Disabled Veterans - Complete Exemption

Veterans rated 100% disabled by the VA qualify for full property tax exemption on their primary residence. You pay only a $300 minimum tax annually, regardless of home value.

How it works:

Exemption applies to your primary residence only
Home can be any value - $500K, $1M, $2M - exemption covers it all
Must be rated 100% disabled (P&T or not doesn't matter)
Exemption varies slightly by county but all four Hawaii counties offer full exemption for 100% disabled veterans
One-time application - no annual renewal required (unless you move)

Real-World Examples by County

Honolulu County (Oahu)

Home market value: $1,200,000 (median single-family home)
Assessed value: $1,200,000
Homeowner exemption: $120,000
Net taxable value without veteran exemption: $1,080,000
Property tax rate: $3.50 per $1,000
Without veteran exemption: $3,780 annually
With 100% disabled veteran exemption: $300 annually (minimum tax)
Annual savings: $3,480

Home value: $800,000 (condo)

Net taxable value without veteran exemption: $680,000
Without veteran exemption: $2,380 annually
With 100% disabled veteran exemption: $300 annually
Annual savings: $2,080

Maui County

Home market value: $1,500,000
Homeowner exemption: $200,000 (highest in state)
Net taxable value without veteran exemption: $1,300,000
Property tax rate: ~$5.50 per $1,000 (residential)
Without veteran exemption: $7,150 annually
With 100% disabled veteran exemption: $300 annually
Annual savings: $6,850

Hawaii County (Big Island)

Home market value: $700,000 (more affordable than Oahu/Maui)
Homeowner exemption: $40,000
Net taxable value without veteran exemption: $660,000
Property tax rate: $11.10 per $1,000 (residential)
Without veteran exemption: $7,326 annually
With 100% disabled veteran exemption: $300 annually
Annual savings: $7,026

Kauai County

Home market value: $1,000,000
Homeowner exemption: $160,000
Net taxable value without veteran exemption: $840,000
Property tax rate: ~$5.50 per $1,000
Without veteran exemption: $4,620 annually
With 100% disabled veteran exemption: $300 annually
Annual savings: $4,320

Disability Ratings Below 100% - No Exemption

Unlike many states that offer graduated exemptions (e.g., partial exemptions at 50%, 70%), Hawaii's property tax exemption is binary:

100% disabled: Full exemption (pay only $300)
90% or lower: No exemption whatsoever

Why this matters: If you're rated 90% and hoping to save on property taxes, you won't. Hawaii doesn't offer partial exemptions. The only benefit is the military retirement income tax exemption.

Surviving Spouses

A surviving spouse of a 100% disabled veteran who remains unmarried and continues to own and occupy the home can claim the full property tax exemption.

Requirements:

Must be unmarried (exemption ends upon remarriage)
Must own the property
Must occupy as primary residence
Must file claim with county real property tax office

This benefit can save surviving spouses thousands of dollars annually and help them afford to remain in their homes.

Homeowner Exemptions (All Residents)

Hawaii counties offer homeowner exemptions to all owner-occupants, not just veterans:

County	Homeowner Exemption
Honolulu (Oahu)	$120,000
Maui	$200,000
Hawaii (Big Island)	$40,000
Kauai	$160,000

These exemptions reduce assessed value for all homeowners. Veterans who don't qualify for the 100% disabled exemption still benefit from these standard exemptions.

Example: Non-disabled veteran on Oahu with $1M home

Assessed value: $1,000,000
Homeowner exemption: $120,000
Taxable value: $880,000
Tax rate: $3.50 per $1,000
Annual property tax: $3,080

Property Tax Rates by County (2025)

Hawaii's property tax rates are expressed per $1,000 of net taxable assessed value and vary by county and property classification.

Honolulu County (Oahu)

Property Class	Rate per $1,000
Residential	$3.50
Homeowner (owner-occupied)	$3.50
Hotel/Resort	$13.90
Commercial	$12.40

Home exemption: $120,000

Maui County

Property Class	Rate per $1,000
Owner-Occupied (Homeowner)	$3.03 - $5.50 (tiered)
Non-Owner-Occupied Residential	Higher tiered rates
Hotel/Resort	$11.85

Home exemption: $200,000 (highest in state)

Hawaii County (Big Island)

Property Class	Rate per $1,000
Homeowner	$5.95
Residential	$11.10
Resort/Hotel	$12.35

Home exemption: $40,000

Kauai County

Property Class	Rate per $1,000
Owner-Occupied	$2.59 - higher tiers
Non-Owner-Occupied	Tiered rates

Home exemption: $160,000

No Sales Tax - Rare Benefit

Hawaii has no state or local sales tax. This makes Hawaii one of only five states without a general sales tax (along with Alaska, Delaware, Montana, New Hampshire, and Oregon).

However, Hawaii has a General Excise Tax (GET) that functions similarly:

4% on most goods and services
4.5% on wholesale and manufacturing
Businesses pay the tax, but usually pass it to consumers
Not technically a "sales tax" but feels like one

For veterans: No special exemptions from GET. You pay the same rate as all residents and visitors.

Practical impact: You'll see prices slightly higher due to GET, but Hawaii's lack of traditional sales tax means you're not paying 7-10% on every purchase like many mainland states.

Vehicle Registration and Licensing

Disabled Veterans

Hawaii offers vehicle registration fee exemptions and reduced fees for disabled veterans, though specifics vary by disability rating and vehicle type.

Who qualifies:

Service-connected disabled veterans
Exact benefits vary by county

How to apply: Contact your county's Department of Motor Vehicles with VA rating letter and DD-214.

Honolulu County DMV: (808) 768-4325

Disabled Parking Placards

Veterans rated permanently disabled by the VA qualify for disabled parking placards or license plates.

Application: DMV with physician certification or VA documentation

No fee: Hawaii does not charge for disabled parking placards

Cost of Living Reality Check

Hawaii's tax benefits for veterans are substantial. But they're overwhelmed by the highest cost of living in the United States.

Hawaii Cost of Living Index: 184

What this means: Living in Hawaii costs 84% more than the U.S. average.

Comparison: If your expenses on the mainland are $3,000/month, expect to pay $5,520/month in Hawaii for equivalent lifestyle.

Housing Costs (2025)

Oahu (Honolulu County):

Median single-family home: $1,175,000 - $1,192,500 (record high)
Median condo: $496,500 - $536,000
Rent (1BR apartment): $1,800 - $2,500/month
Rent (2BR apartment): $2,200 - $3,200/month
Rent (3BR house): $3,200 - $5,000+/month

Maui County:

Median home: $1,100,000 - $1,500,000
Rent (2BR): $2,800 - $4,000+/month

Hawaii County (Big Island):

Median home: $700,000 - $950,000 (most "affordable")
Hilo side cheaper than Kona side (same house costs 2x more on sunny Kona side)
Rent (2BR): $1,500 - $2,500/month

Kauai County:

Median home: $900,000 - $1,300,000
Rent (2BR): $2,000 - $3,000/month

Reality: Even with 100% property tax exemption, you still need to afford the mortgage or rent. Saving $3,000-$7,000 annually on property taxes doesn't help much when homes cost $1 million+.

Groceries: 50-56% Above National Average

Real costs (Honolulu, 2025):

Gallon of milk: $6.29 - $8.00
Dozen eggs: $5.50 - $7.00
Loaf of bread: $5.50 - $7.00
Pound of ground beef: $8.50 - $11.00
Gallon of gas: $4.40 - $4.80
Pound of chicken breast: $8.00 - $10.00

Monthly grocery bill:

Single person: $600 - $800
Family of four: $1,400 - $2,000

Compare this to mainland: $400 (single), $1,000 (family).

Utilities: 100% Above National Average

Electricity: Hawaii has the highest electricity rates in the United States

Average rate: $0.42 per kWh (2025)
National average: $0.17 per kWh
Hawaii costs 2.5x more than mainland

Monthly electricity bill:

Small apartment (600 sq ft): $150 - $200
House (1,500 sq ft): $250 - $400
House with AC (not common): $400 - $600+

Why so expensive?: Hawaii generates most electricity from imported petroleum. Solar is growing but still expensive to install.

Water: Varies by island

Oahu: $50 - $100/month typical
Outer islands: Can be higher

Internet/Phone: Similar to mainland ($60 - $120/month)

Transportation

Gas: $4.40 - $4.80/gallon (2025)

Highest in U.S. except California

Car insurance: 10-30% higher than mainland average

Limited competition, island isolation

Vehicle shipping: $1,000 - $2,000 per vehicle from West Coast

Many military members ship vehicles when PCSing

Healthcare

Healthcare costs: 28-35% above national average

Doctor visits: $150 - $250
Specialist visits: $200 - $400
Emergency room: $1,500 - $5,000+

VA healthcare: Available at no cost for eligible veterans (see companion guide on Hawaii VA facilities)

Health insurance: Premiums 20-30% higher than mainland

Financial Impact Analysis: Can You Actually Afford Hawaii?

Let's calculate real financial scenarios for veterans considering Hawaii.

Scenario 1: E-8 Retiree, 20 Years Service, 100% P&T Disabled

Annual income:

Military retirement: $35,000 (state tax exempt)
VA disability (100% P&T): $44,844 (tax-free)
Total: $79,844

Hawaii 20-Year Financial Impact

Benefit	Annual Savings	20-Year Total
No state income tax on $35K retirement	$2,800 (vs 8% avg state)	$56,000
Property tax exemption (Oahu $1M home)	$3,400	$68,000
TOTAL SAVINGS	$6,200	$124,000

The Cost Reality

Annual increased costs vs. national average (family lifestyle):

Housing (rent or mortgage): +$24,000/year ($2,000/month more)
Groceries: +$4,800/year
Utilities: +$2,400/year
Transportation: +$1,800/year
Healthcare (with VA): +$1,000/year
Total increased costs: +$34,000/year

Net position: Saving $6,200/year on taxes, spending $34,000/year more to live in Hawaii

Bottom line: You're $27,800/year in the hole compared to living in an average-cost mainland state.

Can This Veteran Afford Hawaii?

Total income: $79,844 After increased Hawaii costs: Effective buying power of ~$52,000

Feasibility:

If you own home outright: Possible but tight
If you're paying rent ($2,500/month): Extremely difficult
If you're paying mortgage on $1M home: Nearly impossible without additional income

Reality check: Most military retirees with 100% VA disability cannot afford Hawaii on retirement income alone unless they:

Already own a home outright (no mortgage)
Have substantial savings
Have working spouse with six-figure income
Have additional income sources

Scenario 2: O-5 Retiree, 20 Years, 70% Disabled

Annual income:

Military retirement: $55,000 (state tax exempt)
VA disability (70%): $18,000 (tax-free)
Civilian job: $85,000 (state taxable)
Total: $158,000

Tax impact:

Hawaii state tax on $85K civilian income: ~$6,800
Savings from military retirement exemption: ~$4,400 (vs 8% state tax)
Property tax: $3,400 (no veteran exemption at 70%)

Hawaii increased costs: +$34,000/year (same as above)

Net position:

Income: $158,000
After increased costs: Effective $124,000
After taxes: ~$108,000 take-home

Scenario 3: E-6 Retiree, 20 Years, 50% Disabled, Working Spouse

Annual income:

Military retirement: $28,000 (state tax exempt)
VA disability (50%): $11,000 (tax-free)
Veteran's job: $50,000 (state taxable)
Spouse's job: $50,000 (state taxable)
Total: $139,000

Tax impact:

Hawaii state tax on $100K combined civilian income: ~$8,000
Savings from military retirement exemption: ~$2,240
Property tax: $3,400 (no exemption at 50%)

Net position:

Gross income: $139,000
After increased Hawaii costs: Effective $105,000
After taxes: ~$93,000 take-home

Feasibility: Tight but possible with dual income and financial discipline. Requires both spouses working to afford Hawaii lifestyle.

Who Can Afford Hawaii Financially?

You can likely afford Hawaii if:

Combined household income $120K+ with both spouses working
You're 100% P&T disabled with home paid off
You work high-paying job ($100K+) in addition to retirement
You have substantial retirement savings/investments
You're willing to live frugally (small condo, minimal dining out, used car, no luxuries)

You likely cannot afford Hawaii if:

You're retiring on E-7 or below military retirement alone
You have no disability rating or <70%
You're single income with dependents
You expect to maintain mainland lifestyle on retirement income
You need to finance a home (mortgage on $1M+ home is $5,000+/month)

The Brutal Math

Income needed to live comfortably in Hawaii (family of 4):

Conservative estimate: $100,000 - $120,000
Comfortable estimate: $150,000 - $180,000
With mortgage on $1M home: $180,000 - $200,000+

Median household income in Hawaii: $88,000

Below the "comfortable" threshold

Most military retirees earn: $30,000 - $50,000 military retirement + VA disability

Well below the threshold without additional employment

Conclusion: The math doesn't work for most military retirees unless you have substantial additional income, 100% disability with paid-off home, or significant savings.

How to Claim Your Benefits

Property Tax Exemption (100% Disabled Veterans)

Timeline: Apply with your county real property tax office as soon as you establish Hawaii residency and receive your 100% VA rating.

Required documents:

VA rating decision letter showing 100% disability rating
Hawaii driver's license or state ID
Property deed or mortgage documents
DD-214 (Certificate of Release or Discharge from Active Duty)
Completed exemption form (varies by county)

Where to apply:

Honolulu County (Oahu)

Real Property Assessment Division: (808) 768-3799
Address: 842 Bethel Street, Honolulu, HI 96813
Form: Form E-8-10.5 (Exemption for Homes of Totally Disabled Veterans)
Website: realproperty.honolulu.gov

Maui County

Real Property Tax Division: (808) 270-7297
Address: 70 East Kaahumanu Avenue, Suite A-18, Kahului, HI 96732
Website: mauicounty.gov/rpt

Hawaii County (Big Island)

Real Property Tax Office: (808) 961-8201
Address: 101 Pauahi Street, Suite 4, Hilo, HI 96720
Website: hawaiipropertytax.com

Kauai County

Real Property Division: (808) 241-4224
Address: 4444 Rice Street, Suite 463, Lihue, HI 96766
Website: kauai.gov/RealProperty

Processing time: 30-90 days typically

Annual renewal: Not required once approved. This is a "one-and-done" exemption. You must notify the county if you move or your circumstances change.

State Income Tax Exemption (Military Retirement)

No application required. When filing your Hawaii state income tax return (Form N-11), military retirement pay is automatically excluded from taxable income.

How to file:

Online: hitax.hawaii.gov
Hawaii Department of Taxation: (808) 587-4242
Mail: P.O. Box 3559, Honolulu, HI 96811-3559

When filing: Report military retirement pay on your federal return (Form 1040) but exclude it from Hawaii state return

Tax software: Most tax software (TurboTax, H&R Block, TaxAct) automatically handles Hawaii's military retirement exemption

Vehicle Registration (Disabled Veterans)

Where: County Department of Motor Vehicles

Honolulu DMV

Phone: (808) 768-4325
Address: 530 South King Street, Honolulu, HI 96813

Documents needed:

VA rating letter
Hawaii driver's license
Vehicle title/registration
DD-214

Processing: Same-day for registration, 2-4 weeks for special plates

Frequently Asked Questions

Does Hawaii tax military retirement pay?

No. Hawaii completely exempts military retirement pay from state income tax. You owe $0 state tax on military retirement regardless of the amount.

Can I get the property tax exemption if I'm rated 90%?

No. Hawaii's property tax exemption requires a 100% disability rating. At 90% or below, you receive no property tax exemption benefit. Hawaii doesn't offer partial exemptions like some states.

What if I'm 100% P&T but it's Individual Unemployability (IU)?

The Hawaii property tax exemption applies to 100% disability ratings regardless of whether it's P&T, IU, or temporary. As long as the VA rates you 100%, you qualify.

Is the property tax exemption the same on every island?

Can I afford Hawaii on military retirement alone?

Does Hawaii have sales tax?

No traditional sales tax, but Hawaii has a 4% General Excise Tax (GET) that businesses pay and usually pass to consumers. It functions similarly to sales tax but is technically different.

Can I stack the homeowner exemption and veteran exemption?

What if I move from Oahu to Maui?

You must reapply for the property tax exemption in your new county. The exemption doesn't automatically transfer between counties.

Can my surviving spouse keep the exemption?

Yes, if they remain unmarried and continue to own and occupy the home as their primary residence. The exemption ends upon remarriage or if they move.

Is VA disability compensation taxable in Hawaii?

No. VA disability compensation is tax-free at both federal and state levels.

How much do I really need to earn to live in Hawaii?

Realistic minimums:

Single person: $80,000 - $100,000
Family: $120,000 - $150,000
Comfortable family lifestyle with home: $150,000 - $200,000+

These figures assume you're paying rent or mortgage. If you own outright, reduce by $30K-$50K.

Should I move to Hawaii as a veteran?

Come to Hawaii if:

You're stationed here and love it
You have high-paying job lined up ($100K+)
You're 100% P&T with substantial savings
You value paradise lifestyle over financial optimization
You have dual high income household

Don't come to Hawaii if:

You expect to live on E-6 or E-7 retirement alone
You have no job prospects or savings
You're <100% disabled (no property tax benefit)
You prioritize financial security over lifestyle

Can I use a VA loan to buy in Hawaii?

Is Hawaii really worth it for veterans?

Financially? No, for most veterans. The tax benefits don't offset the cost of living.

Come for the lifestyle, not the money.

Key Takeaways

Military retirement pay is 100% state tax exempt - this is Hawaii's biggest veteran financial benefit
100% disabled veterans get full property tax exemption - saving $3,000 - $7,000+ annually depending on home value
No exemptions for <100% disabled - if you're 90% or below, you get no property tax benefit
Hawaii's cost of living is catastrophic - 84% above national average, driven by housing ($1M+ homes), groceries (+50%), and utilities (+100%)
Tax benefits don't offset living costs - saving $6,000/year on taxes while spending $34,000/year more to live here
You need $100K-$150K+ household income to live comfortably in Hawaii as a family
Most military retirees can't afford Hawaii on retirement income alone without additional employment, 100% disability, or substantial savings
Choose Hawaii for lifestyle, not finances - if you prioritize perfect weather, beaches, and outdoor living over money, Hawaii might be worth it

Hawaii offers real tax benefits to veterans. But they're overwhelmed by the highest cost of living in America. Run your personal numbers carefully before relocating.

Resources

Hawaii Office of Veterans Services: (808) 433-0420 | dod.hawaii.gov/ovs
Honolulu Real Property Assessment: (808) 768-3799 | realproperty.honolulu.gov
Hawaii Department of Taxation: (808) 587-4242 | tax.hawaii.gov
VA Pacific Islands Healthcare: 1-800-214-1306 | va.gov/pacific-islands-health-care
County real property tax offices: Contact individual counties for specific exemption forms and requirements