Active-duty pay
Partially Exempt
First $7,683 of active pay exempt for HI residents stationed outside the state.
State Guide · HI
Hawaii — Military Tax Treatment
Hawaii fully exempts military retirement but the active duty exclusion is station-dependent. Guard members drilling in Hawaii pay full state income tax on drill pay. Hawaii has relatively high income tax rates — this matters more here than in most states.
Tax treatment at a glance
Guard & Reserve drill pay
Taxed
Guard members who live and drill in Hawaii are in-state residents performing in-state service — the active duty exclusion requires serving outside HI and does not apply to routine drill. Drill pay is fully taxable as HI income.
Military retirement pay
Fully Exempt
Military retirement pay fully exempt.
The numbers · verified for tax year 2025
Top marginal rate
11%
Retirement-pay exemption
Full
Military retired pay is 100% exempt from Hawaii income tax — no cap, no age requirement. (Active-duty pay of Hawaii residents is taxable; only retired pay is exempt.)
Standard deduction
For 2025 the standard deduction is $4,400 single / $8,800 MFJ (held flat from 2024 under Act 46, with further increases scheduled). The 12-bracket schedule tops out at 11%.
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — Hawaii included.
Survivor Benefit Plan (SBP)
Follows retirement
Hawaii exempts military retirement — SBP annuities are generally exempt under the same provision.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in Hawaii, Hawaii cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to Hawaii can keep Texas as their tax domicile and avoid Hawaii state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether Hawaii exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01Active duty exclusion: HI Form N-11 with military pay exclusion — only if stationed outside HI
- 02Guard drill pay: fully taxable as regular HI income — withhold HI taxes
- 03Hawaii income tax rates run up to 11% — Guard members may want to set aside 6-9% of drill pay for state taxes
Veteran-specific tax benefits
Property tax exemption for 100% disabled vets.
Official authority
https://tax.hawaii.gov/ ↗State tax law changes annually. Verify current rules with the Hawaii Department of Revenue before making any tax decision.
Hawaii military tax — common questions
Does Hawaii tax military retirement pay in 2026?
Hawaii fully exempts military retirement pay. Military retirement pay fully exempt.
Does Hawaii tax active-duty military pay?
Hawaii partially taxes active-duty military pay for state residents. First $7,683 of active pay exempt for HI residents stationed outside the state. Under the SCRA, Hawaii can only tax the military pay of service members who are legally domiciled in Hawaii — not those merely stationed there.
Does Hawaii tax National Guard and Reserve drill pay?
Hawaii taxes Guard and Reserve drill pay. Guard members who live and drill in Hawaii are in-state residents performing in-state service — the active duty exclusion requires serving outside HI and does not apply to routine drill. Drill pay is fully taxable as HI income.
Is VA disability compensation taxed in Hawaii?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including Hawaii — taxes it as income.
If I'm stationed in Hawaii but claim another state, can Hawaii tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, Hawaii cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides