State Income Tax: 401k and SS (appointed, sales, rent)

[Sunaimer]

What is the current law on income tax for Hawaiian residents? Are 401(k)s taxed? If so, how much? What about Social Security? Any deductions you can make? Thinking of retiring in Hawaii rather then Washington state. No income tax in Washington state, however, property taxes are killing us. And sales tax almost 10%. Mahalo in advance.

[WaikikiBoy]

Originally Posted by Sunaimer

What is the current law on income tax for Hawaiian residents? Are 401(k)s taxed? If so, how much? What about Social Security? Any deductions you can make? Thinking of retiring in Hawaii rather then Washington state. No income tax in Washington state, however, property taxes are killing us. And sales tax almost 10%. Mahalo in advance.

Yes, you're 401(K) will be taxable income. At least a portion of your 401(K) will be taxed. The tax range runs from 1% to 11% (roughly) depending on your taxable income bracket. Social Security is not taxed.

You may have almost 10% sales tax in Washington, but Food is exempt. And food is a major re-occurring expense. In Hawaii, the State GET Tax (like a sales tax) is 4% to 4.5% (roughly) depending on where you live. And Food is NOT exempt. So depending on your spending habits, you could actually pay more in Tax at Hawaii's lower GET rate than you do in Washington just due to the difference in taxation on Food. Plus, the cost of food in general, without the tax included is going to be quite a bit higher in Hawaii to start with.

Property Tax is lower in Hawaii. However, the cost to purchase that property is likely going to be much higher. So you'll either have a much smaller place or you'll pay more in your monthly mortgage. Or you'll settle for a Condo and start paying HOA Fee's.

If you are thinking that Property Taxes are "killing" you already in Washington and thinking you could move to hawaii and have a lower overall cost of living because property taxes are lower, you'll be dissappointed. While Property Taxes won't be killing you anymore, you'll still be paying income tax on your 401(K), Sales (GET) Tax on your Food, and higher prices overall on all your goods and services. You'll also be paying far more for your home or you'll buy a condo with a large monthly HOA payment (most likely in the $500 to $600 per month range).

Washington is a great low-cost retirement state. If property Taxes are killing you, sell your house and move to a smaller house in Washington in a smaller suburb ... or move South to Vancouver WA area. You will retain the advantage of NO Income Tax, lower your property tax, and be able to buy large purchase items in Oregon to avoid the Sales Tax.

Then take month long vacations to Hawaii if you choose.

[Grassyknoll]

I would say it also depends on your debt load and what island you plan on moving to. With noort gage or other debt I am able to live well on way less income than what the consensus is on here regarding how much you need to live. Also, growing your own food year ro7nd and eating local can offset a lot of the additional food expense. I find the Big Island to be much more affordable than Northern California.
Of course, this is wandering from the OP's original question, but the door was opened a bit on the proceeding post.

[ScottStielow]

Originally Posted by WaikikiBoy

Yes, you're 401(K) will be taxable income. At least a portion of your 401(K) will be taxed. The tax range runs from 1% to 11% (roughly) depending on your taxable income bracket. Social Security is not taxed.

You may have almost 10% sales tax in Washington, but Food is exempt. And food is a major re-occurring expense. In Hawaii, the State GET Tax (like a sales tax) is 4% to 4.5% (roughly) depending on where you live. And Food is NOT exempt. So depending on your spending habits, you could actually pay more in Tax at Hawaii's lower GET rate than you do in Washington just due to the difference in taxation on Food. Plus, the cost of food in general, without the tax included is going to be quite a bit higher in Hawaii to start with.

Property Tax is lower in Hawaii. However, the cost to purchase that property is likely going to be much higher. So you'll either have a much smaller place or you'll pay more in your monthly mortgage. Or you'll settle for a Condo and start paying HOA Fee's.

If you are thinking that Property Taxes are "killing" you already in Washington and thinking you could move to hawaii and have a lower overall cost of living because property taxes are lower, you'll be dissappointed. While Property Taxes won't be killing you anymore, you'll still be paying income tax on your 401(K), Sales (GET) Tax on your Food, and higher prices overall on all your goods and services. You'll also be paying far more for your home or you'll buy a condo with a large monthly HOA payment (most likely in the $500 to $600 per month range).

Washington is a great low-cost retirement state. If property Taxes are killing you, sell your house and move to a smaller house in Washington in a smaller suburb ... or move South to Vancouver WA area. You will retain the advantage of NO Income Tax, lower your property tax, and be able to buy large purchase items in Oregon to avoid the Sales Tax.

Then take month long vacations to Hawaii if you choose.

Have to agree with WaikikiBoy. I would downsize and stay up in the Washington. Or you could look Eastern Washington is less costly. I have Relatives living in Vancouver Washington is another good area to look.

[terracore]

GET (general excise tax) is nothing like a sales tax.

In a sales tax, the tax is paid once by the consumer on goods (and in a few areas, also on services). In a GET, the tax is on the consumer and also all the businesses, including services, rents, and wholesale goods (wholesale GET % differs). Every hand and transaction a product passes through pays the excise tax (there are few exceptions). So while the end consumer only sees the GET tax that they paid, they don't see that the retailer already paid that tax once (and marked price up appropriately), the wholesaler paid it (and marked price up appropriately), not just on the products moved but also rents paid and services rendered (and marked price up appropriately). So when their roof was leaking and they hired the roofer, they paid the roofer the GET (and marked price up appropriately). And the roofer paid the GET on his roofing supplies (and marked price up appropriately). And the guy who sold him the roofing supplies paid the GET (and marked price up appropriately). And the roofer paid the GET to store his roofing supplies in his rent (and marked price up appropriately).

So, a sales tax is paid once, the GET is paid over and over and over and over and over and over and over (I could go on) again. It's the reason why things cost so much in Hawaii. It's not because HNL is 2500 miles away from LAX. LAX is 2400 miles away from New York and it's cheaper to barge things than it is to truck it. If distance was the only issue, goods produced on the west coast could cost less in Hawaii than they do in NYC, not more.

Here's where it actually gets WORSE: A business has two ways it can deal with GET. For example lets say something costs $10.00 and the tax is 4.5%. One option is the merchant charges $10 and then remits 4.5% to the state. The most common method however is that the merchant charges the consumer the $10.00 plus the 4.5%. Are you ready for this? When a merchant does that, THE 4.5% THEY PASSED ONTO THE CONSUMER IS SUBJECT TO THE GET TAX! Yes, you are getting taxed on a tax! So the 4.5% becomes 4.7025%, which is automatically rounded up to 4.712%

This website explains it better than I do: http://www.ronswebsite.com/blog/hawa...al-excise-tax/

[Sunaimer]

So you have to pay a federal AND State income tax on your 401k and Roth?

[ScottStielow]

Originally Posted by Sunaimer

So you have to pay a federal AND State income tax on your 401k and Roth?

Yes, I believe that is true. The only retirement, i know that is not taxes by the State, is Military Retirements, Surprised!! I was at first! I have TSP which is a Federal Gov 401k tax deferred plan, until Withdrawal time, from your account in retirement. I'm enrolled at work, so i have to, Make a decision where I will retire in a few years.
How about in Washington, regarding your 401k and Roth?

[ChezAloha]

Originally Posted by ScottStielow

The only retirement, i know that is not taxes by the State, is Military Retirements

Currently, Hawai'i does not tax any government paid retirement, state (no matter which state) or federal, nor is Social Security taxed. Non-contributory pension income is also not taxed.

Pension income that you contributed to, money from an IRA or 401(k) is taxed.