Hawaii does not tax Social Security Disability Insurance (SSDI) payments

Hawaii is one of the states that does not impose a state income tax on SSDI benefits. If you receive SSDI and live in Hawaii, you will not owe Hawaii state income tax on those payments, regardless of how much you receive or what other income you have.

This is different from federal income tax. The federal government may tax a portion of your SSDI depending on your total income for the year — but Hawaii's state tax code straightforward excludes SSDI from taxation altogether. You do not need to report SSDI on a Hawaii state tax return.

However, if you have other sources of income besides SSDI — such as wages, self-employment income, interest, or pensions — Hawaii may tax those other sources. Only the SSDI portion is protected from Hawaii state tax.

Key Takeaways

  • Hawaii does not tax SSDI payments under state law, so you owe no Hawaii state income tax on your disability benefits.
  • The federal government may still tax a portion of your SSDI based on your total income, even though Hawaii does not.
  • If you have income from sources other than SSDI, Hawaii taxes those sources normally.
  • You do not need to report SSDI on your Hawaii state tax return, but you must report it on your federal return if your total income exceeds the threshold.
  • Hawaii has no state income tax at all, which means no one in the state pays state income tax on any source of income.

Why Hawaii does not tax SSDI

Hawaii is one of nine states with no state income tax. Because Hawaii does not collect income tax from residents on any type of income, SSDI is automatically excluded. There is no special carve-out for disability benefits — the state straightforward does not tax income.

The nine states with no income tax are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and Hawaii. If you move to any of these states, you will not pay state income tax on SSDI or any other income.

This is a permanent feature of Hawaii's tax code, not a temporary exemption. As long as you live in Hawaii and receive SSDI, that income will never be subject to Hawaii state tax.

Federal tax on SSDI still applies in Hawaii

Even though Hawaii does not tax SSDI, the federal government may. Whether you owe federal tax on your SSDI depends on your combined income — a calculation that includes SSDI, wages, self-employment income, interest, dividends, and certain other sources.

The Internal Revenue Service (IRS) uses a formula to determine how much of your SSDI is taxable. If your combined income is below a certain threshold, none of your SSDI is taxed. If it exceeds the threshold, up to 50 percent or 85 percent of your SSDI may be taxable, depending on how much over the threshold you go.

The thresholds are $25,000 for single filers and $32,000 for married couples filing jointly. These thresholds have not changed since 1984 and do not adjust for inflation. You must report SSDI on your federal tax return (Form 1040) if your combined income exceeds these amounts, even though Hawaii will not tax it.

What counts as income when calculating federal tax on SSDI

The IRS counts more than just wages and SSDI when determining whether you owe federal tax on your benefits. Combined income includes:

  • Wages and salaries
  • Self-employment income
  • Interest and dividends
  • Rental income
  • Pensions and annuities
  • Half of your SSDI benefits
  • Veterans benefits (in some cases)
  • Railroad retirement benefits

If you have little or no income besides SSDI, you almost certainly will not owe federal tax on your benefits. But if you work part-time, receive a pension, or have investment income, your combined income may push you over the threshold, making a portion of your SSDI taxable at the federal level.

Reporting SSDI on your Hawaii tax return

You do not file a Hawaii state income tax return. Hawaii has no state income tax form, no state filing requirement, and no state tax agency that collects income tax from residents. This applies to everyone in Hawaii, regardless of income source or amount.

If you receive a notice from the Hawaii Department of Taxation about income tax, it is likely related to a different tax (such as property tax or a business tax) rather than income tax on SSDI or wages. Contact the department directly if you are unsure what the notice concerns.

If you move to Hawaii or leave Hawaii

If you move to Hawaii from a state that does tax SSDI, your SSDI will no longer be subject to state income tax once you establish residency. Hawaii considers you a resident for tax purposes once you move there with the intent to stay, though the exact timing can depend on your circumstances.

If you move away from Hawaii to a state that does tax SSDI, your benefits will become taxable under that state's rules starting in the tax year you move. You will need to report SSDI on your new state's tax return if your combined income exceeds that state's threshold.

Keep records of when you moved, where you moved, and documentation of your intent to establish residency (such as a lease, utility bill, or driver's license). These documents can help if a state tax agency questions your residency status.

Other Hawaii tax considerations for SSDI recipients

While Hawaii does not tax SSDI, you may still owe federal taxes on other income. If you work while receiving SSDI, you must report your wages on your federal return. If you have investment income or rental income, that is also taxable at the federal level.

SSDI recipients in Hawaii should also be aware that certain benefits programs — such as Supplemental Security Income (SSI) or Medicaid — may have income limits that count SSDI as income. Even though SSDI is not taxed in Hawaii, it still counts toward your total income for purposes of determining whether you remain may be able to access for other information programs.

If you receive both SSDI and SSI, the SSI portion is also not taxed by Hawaii, but the federal government does not tax SSI either. Only SSDI has the potential for federal taxation.

Frequently Asked Questions

Do I have to file a Hawaii state tax return if I receive SSDI?

No. Hawaii has no state income tax, so there is no state tax return to file. You do not report SSDI or any other income to Hawaii's tax agency. You may still need to file a federal return with the IRS if your combined income exceeds the federal threshold.

Will I owe federal tax on my SSDI in Hawaii?

It depends on your combined income. If your combined income (including half your SSDI) is below $25,000 (single) or $32,000 (married filing jointly), you will not owe federal tax on your SSDI. If it exceeds that threshold, up to 85 percent of your SSDI may be taxable federally.

What if I work part-time and receive SSDI in Hawaii?

Your wages are not taxed by Hawaii, but they are taxed by the federal government. Your wages also count toward your combined income, which may make a portion of your SSDI taxable federally. You must report both wages and SSDI on your federal return.

If I move to Hawaii, will my SSDI stop being taxed?

Yes, once you establish residency in Hawaii, your SSDI will no longer be subject to state income tax. However, you may still owe federal tax on your SSDI depending on your combined income. The timing of when the state tax stops depends on when you establish Hawaii residency.

Is SSI taxed differently than SSDI in Hawaii?

No. Hawaii does not tax SSI either, because Hawaii taxes no income. However, SSI is also not taxed by the federal government, so you will not owe federal tax on SSI under any circumstances. Only SSDI has the potential for federal taxation.