Military Retirement in Hawaii: Complete 2026 Tax Guide
Partial exemption up to $40,000-$75,000 based on age + unique island lifestyle
🎯 Quick Summary: Hawaii Military Retirement Taxes (2026)
- ✓ Military retirement pay: Partial exemption based on age
- • Age under 55: No exemption (fully taxable)
- • Age 55-64: Up to $40,000 exempt
- • Age 65+: Up to $75,000 exempt
- ✓ VA disability payments: Tax-free (federal and state)
- ⚠ Cost of living: 84% above national average (highest in US)
- ✓ Military presence: 11 major installations with full retiree access
Hawaii Tax Breakdown 2026
Military Retirement Pay Exemption
Age-Based Partial Exemption
| Your Age | Exemption Amount (2026) | Tax Treatment |
|---|---|---|
| Under 55 | $0 | 100% of military retirement is taxable |
| 55-64 | $40,000 | First $40,000 exempt, remainder taxable |
| 65+ | $75,000 | First $75,000 exempt, remainder taxable |
Important: VA disability compensation is always 100% tax-free (federal and state).
2026 Hawaii State Income Tax Brackets
| Income Bracket (Single) | Tax Rate | Income Bracket (Married) |
|---|---|---|
| $0 - $2,400 | 1.4% | $0 - $4,800 |
| $2,401 - $4,800 | 3.2% | $4,801 - $9,600 |
| $4,801 - $9,600 | 5.5% | $9,601 - $19,200 |
| $9,601 - $14,400 | 6.4% | $19,201 - $28,800 |
| $14,401 - $19,200 | 6.8% | $28,801 - $38,400 |
| $19,201 - $24,000 | 7.2% | $38,401 - $48,000 |
| $24,001 - $36,000 | 7.6% | $48,001 - $72,000 |
| $36,001 - $48,000 | 7.9% | $72,001 - $96,000 |
| $48,001 - $150,000 | 8.25% | $96,001 - $300,000 |
| $150,001 - $175,000 | 9% | $300,001 - $350,000 |
| $175,001 - $200,000 | 10% | $350,001 - $400,000 |
| $200,001+ | 11% | $400,001+ |
Property Tax Exemptions for Veterans (2026)
| Disability Rating | Property Tax Benefit |
|---|---|
| 100% Service-Connected Disability | 100% property tax exemption on primary residence (first $400,000 assessed value) |
| Totally Disabled (any cause) | $140,000 home value exemption |
Note: Hawaii also offers a general home exemption of $100,000 for owner-occupied properties (all homeowners).
Real-World Tax Examples (2026)
Example 1: E-7 Retired at Age 62 (2026)
- • Military retirement pay: $33,600/year
- • VA disability (70%): $22,992/year (tax-free)
- • Part-time civilian job: $20,000/year
- • Total income: $76,592
Hawaii Tax Calculation:
- • Military retirement: $33,600 (FULLY EXEMPT - under $40,000 age 55-64 limit)
- • VA disability: $22,992 (EXEMPT)
- • Civilian income: $20,000 (taxable)
- • Taxable income: $20,000
- • Hawaii state tax: ~$1,050/year
Hawaii
$1,050/year state tax
Texas/Florida (No Income Tax)
$0/year state tax
Example 2: O-5 Retired at Age 68 (2026)
- • Military retirement pay: $60,000/year
- • VA disability (50%): $12,516/year (tax-free)
- • Social Security: $28,000/year (85% taxable federally)
- • Total income: $100,516
Hawaii Tax Calculation:
- • Military retirement: $60,000
- - First $75,000 EXEMPT (age 65+)
- - Amount exempt: $60,000 (full amount)
- • VA disability: $12,516 (EXEMPT)
- • Social Security: $28,000 (NOT taxed by Hawaii)
- • Taxable income: $0
- • Hawaii state tax: $0/year
Hawaii charges $0 in this scenario because retirement income is under $75,000 exemption!
Example 3: O-6 High Income Retired at Age 70 (2026)
- • Military retirement pay: $95,000/year
- • VA disability (30%): $7,152/year (tax-free)
- • Consulting income: $60,000/year
- • Total income: $162,152
Hawaii Tax Calculation:
- • Military retirement: $95,000
- - First $75,000 EXEMPT (age 65+)
- - Taxable amount: $20,000
- • VA disability: $7,152 (EXEMPT)
- • Consulting income: $60,000 (taxable)
- • Total taxable income: $80,000
- • Hawaii state tax: ~$6,200/year
Hawaii
$6,200/year state tax
Texas/Florida (No Income Tax)
$0/year state tax
Higher earners pay significantly more in Hawaii vs. no-tax states
Cost of Living in Hawaii (2026)
Highest Cost of Living in the United States
Hawaii's overall cost of living is approximately 84% ABOVE the national average. This is primarily driven by extreme housing costs and the expense of importing goods to the islands.
Housing
- • Median home price: $850,000 (Oahu)
- • Median rent (2-bed): $2,800-$3,500/month
- • 170% above national average
- • Lower on neighbor islands (Maui, Big Island, Kauai)
Groceries
- • 50-70% above national average
- • Gallon of milk: $7-9
- • Loaf of bread: $5-7
- • Commissary access reduces costs 30-40%
Utilities
- • Electricity: $200-350/month (highest in US)
- • No heating costs
- • Internet: $60-100/month
- • 50% above national average
Transportation
- • Gas: $4.50-5.50/gallon
- • Car insurance: Higher than mainland
- • Limited public transit (Oahu has TheBus)
- • Inter-island flights: $80-200 each way
💡 Cost-Saving Strategies for Military Retirees:
- • Use commissary and exchange: Save 30-40% on groceries and goods
- • Buy local produce: Farmers markets offer fresh island-grown food at lower prices
- • Consider neighbor islands: Big Island, Maui, Kauai have lower housing costs than Oahu
- • Utilize TRICARE: Excellent military healthcare network reduces medical expenses
- • Solar power: Many homes use solar to offset high electricity costs
- • Live near base: Reduces commuting costs and provides easy access to military facilities
Education Benefits for Veterans in Hawaii
Limited State Programs - Focus on Federal Benefits
Important: Hawaii does NOT have a state-specific veteran tuition assistance program. However, veterans benefit from excellent federal GI Bill benefits, in-state tuition access, and some of the highest BAH rates in the nation.
All veterans qualify for in-state tuition rates at University of Hawaii system schools, regardless of residency status, thanks to the Veterans Access, Choice, and Accountability Act.
Who Qualifies:
- Veterans using GI Bill benefits
- Active duty service members
- Spouses and dependents using transferred GI Bill benefits
Note: Must enroll within 3 years of separation from active duty for in-state rate eligibility.
The University of Hawaii system operates 10 campuses statewide with dedicated veteran services offices.
UH Manoa (Oahu)
Flagship campus - comprehensive programs, strong military community
UH Hilo (Big Island)
Lower cost of living, outdoor education programs
UH West Oahu
Near military bases, flexible scheduling for working veterans
Veteran Services at UH:
- Dedicated Veterans Affairs Coordinators
- Veterans Lounges and study spaces
- Priority registration
- Transition assistance programs
- Student veteran organizations
Hawaii's community college system offers affordable education with full GI Bill acceptance and veteran support services.
7 Community College Locations:
Oahu:
- Honolulu Community College
- Kapiolani Community College
- Leeward Community College
- Windward Community College
Neighbor Islands:
- Hawaii CC (Hilo & Palamanui)
- Kauai Community College
- Maui College
Benefits:
- • Lower tuition costs - typically $135-150/credit hour (in-state)
- • Full GI Bill BAH payments while enrolled
- • Career and technical training programs
- • Easy transfer pathways to UH 4-year campuses
- • Evening and weekend classes for working veterans
Two private universities in Hawaii participate in the Yellow Ribbon Program, covering costs beyond the Post-9/11 GI Bill cap for private schools.
Hawaii Pacific University
Downtown Honolulu & Hawaii Loa campus
- • Military-friendly (top ranked)
- • Flexible degree programs
- • Strong veteran support services
Chaminade University
Honolulu (near military bases)
- • Small class sizes
- • Catholic university with values-based education
- • Yellow Ribbon for undergraduate & graduate
Yellow Ribbon Program: Eligible Post-9/11 GI Bill recipients (100% eligibility) can attend these schools with no out-of-pocket tuition costs. The school and VA split costs exceeding the GI Bill private school cap.
Honolulu: $3,500+/month BAH
One of the highest GI Bill housing allowances in the United States!
2026 Monthly BAH Rates (Post-9/11 GI Bill):
| Location (ZIP) | Monthly BAH |
|---|---|
| Honolulu (96801) | $3,573 |
| Pearl City (96782) | $3,573 |
| Hilo (96720) | $2,637 |
What This Means:
Full-time students (12+ credits) receive this monthly housing allowance TAX-FREE while attending school. For comparison:
- • Honolulu BAH: $3,573/month ($42,876/year)
- • Average U.S. BAH: ~$1,800/month ($21,600/year)
- • Annual difference: ~$21,000 more in Hawaii
This high BAH helps offset Hawaii's high cost of living and can make going to school in Hawaii financially attractive for veterans.
Step 1: Apply for GI Bill Benefits
Apply online at VA.gov (Form 22-1990)
Processing time: 30 days. You'll receive a Certificate of Eligibility (COE).
Step 2: Choose Your School & Apply for Admission
All University of Hawaii and community colleges accept GI Bill benefits. Private schools (HPU, Chaminade) have veteran-specific admissions counselors.
Step 3: Submit COE to School's VA Certifying Official
Each school has a Veterans Affairs office that will certify your enrollment to the VA each semester.
Hawaii Office of Veterans Services (OVS)
Address: 459 Patterson Road, E-Wing, Room 1-A103, Honolulu, HI 96819
Phone: (808) 433-0420
Email: ovs.honors@hawaii.gov
Services: Education benefits counseling, VA claims assistance, state veteran programs
Additional Resources:
- • VA Education Call Center: 1-888-GI-BILL-1 (1-888-442-4551)
- • UH Veterans Services: hawaii.edu/veterans
- • VetSuccess on Campus: Available at UH Manoa for personalized counseling
Military Presence in Hawaii
Hawaii has 11 major military installations primarily on Oahu, with significant presence across all service branches. Hawaii is home to U.S. Indo-Pacific Command.
Major Installations (Oahu)
- • Joint Base Pearl Harbor-Hickam - Navy/Air Force headquarters
- • Schofield Barracks - Army 25th Infantry Division
- • Marine Corps Base Hawaii (Kaneohe Bay)
- • Fort Shafter - U.S. Army Pacific HQ
- • Wheeler Army Airfield
- • Tripler Army Medical Center - Pacific's largest military hospital
Other Islands
- • PMRF Barking Sands (Kauai) - Pacific Missile Range
- • Pohakuloa Training Area (Big Island) - Army training
- • Bellows Air Force Station (Oahu - Windward)
Military retirees have full access to all commissaries, exchanges, golf courses, beaches, and recreational facilities across installations.
Veteran Healthcare Facilities
Hawaii has excellent military and VA healthcare:
Military Treatment Facilities:
- • Tripler Army Medical Center (Oahu)
- • Branch health clinics across bases
VA Facilities:
- • VA Pacific Islands Health Care System
- • Spark M. Matsunaga Medical Center (Honolulu)
- • VA clinics on neighbor islands
Pros and Cons of Retiring in Hawaii
✅ Pros
- • Partial tax exemption ($40K-$75K based on age)
- • High GI Bill BAH rates (Honolulu $3,500+/month)
- • All veterans qualify for in-state tuition
- • Beautiful year-round weather (75-85°F)
- • Strong military community (116,000+ active duty)
- • 11 military installations with full retiree access
- • Unique island lifestyle - beaches, hiking, water sports
- • Excellent healthcare - Tripler AMC and VA facilities
- • Safe, low crime in many areas
- • No extreme weather (no snow, hurricanes rare)
⚠️ Cons
- • Highest cost of living in US (84% above national average)
- • Extreme housing costs ($850K median on Oahu)
- • High grocery prices (50-70% above mainland)
- • Geographic isolation (2,500 miles from mainland)
- • Expensive to visit family ($500-1,000 flights)
- • "Island fever" - some feel confined over time
- • Limited job market outside tourism/military
- • Traffic congestion on Oahu (H-1 freeway)
Best Hawaii Locations for Military Retirees
Ewa Beach / Kapolei (Oahu)
West side of Oahu near military bases. Newer developments, more affordable housing, strong military community.
- • Median Home Price: $750,000-850,000
- • Close to Pearl Harbor, Schofield
- • Growing area with new shopping/restaurants
Kailua (Oahu)
Windward side near MCBH Kaneohe. Beautiful beaches, residential, high quality of life. More expensive.
- • Median Home Price: $1.2-1.5 million
- • Near Marine Corps Base Hawaii
- • Excellent schools and amenities
Hilo (Big Island)
Lower cost of living, slower pace. Rainier side of Big Island. More affordable for retirees on fixed income.
- • Median Home Price: $450,000-550,000
- • Significantly lower cost than Oahu
- • Small-town feel, less touristy
Kihei (Maui)
South Maui with great weather, beaches. Mid-range pricing between Oahu and outer islands.
- • Median Home Price: $800,000-950,000
- • Sunny, dry climate
- • Growing retiree community
Frequently Asked Questions
Does Hawaii tax military retirement pay?
Hawaii offers a PARTIAL exemption for military retirement pay. For 2026:
- Age under 55: No exemption (fully taxable)
- Age 55-64: Up to $40,000 exempt
- Age 65+: Up to $75,000 exempt
Any military retirement income above these amounts is subject to Hawaii state income tax (rates from 1.4% to 11%).
How much does it cost to live in Hawaii as a military retiree?
Hawaii has the highest cost of living in the United States, approximately 84% above the national average. Housing is the biggest expense, with median home prices around $850,000 on Oahu in 2026. Groceries cost 50-70% more than mainland, and utilities run higher. However, access to military commissaries and exchanges can significantly reduce costs for retirees. Many military retirees find that using base facilities, shopping at the commissary, and living strategically can make Hawaii affordable, especially if your retirement income is below the age-based exemption threshold.
What military bases are in Hawaii for retiree access?
Hawaii has 11 major military installations including:
- Joint Base Pearl Harbor-Hickam (Navy/Air Force)
- Schofield Barracks (Army)
- Marine Corps Base Hawaii (Kaneohe Bay)
- Fort Shafter (Army Pacific HQ)
- Tripler Army Medical Center
- Wheeler Army Airfield
- PMRF Barking Sands (Kauai)
- And others
Military retirees have full access to commissaries, exchanges, medical facilities, and recreational services across all installations.
Does Hawaii offer education benefits for veterans?
Hawaii does NOT have a state-specific veteran tuition assistance program. However, veterans using the GI Bill qualify for in-state tuition at all University of Hawaii system schools (10 campuses including UH Manoa, UH Hilo, and 7 community colleges). Two private universities - Hawaii Pacific University and Chaminade University - participate in the Yellow Ribbon Program. The major advantage for student veterans in Hawaii is the exceptionally high GI Bill BAH rate: Honolulu students receive $3,573/month tax-free housing allowance, one of the highest rates in the nation. This high BAH helps offset Hawaii's elevated cost of living.
What is the GI Bill housing allowance in Hawaii?
Hawaii has some of the highest GI Bill BAH rates in the United States. For 2026, full-time students (12+ credits) using Post-9/11 GI Bill benefits receive:
- Honolulu/Pearl City (Oahu): $3,573/month ($42,876/year)
- Hilo (Big Island): $2,637/month ($31,644/year)
This is approximately $21,000 more per year than the national average GI Bill BAH rate (~$1,800/month). The high BAH helps offset Hawaii's high cost of living and makes attending school in Hawaii financially viable for many veterans. The housing allowance is paid directly to the student and is 100% tax-free.
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