Hawaii State Income Tax on Retirement Income

[dawson7700]

I recently read this Kiplinger article (https://www.kiplinger.com/tool/retirement/T055-S001-state-by-state-guide-to-taxes-on-retirees/index....) which suggests "Income from private, government, and military retirement plans is fully exempt if the employee did not contribute to the plan (e.g., a traditional pension). If both the employee and employer contributed to the plan (e.g., a 401(k) plan with an employer matching program), the exclusion applies only to amounts attributable to employer contributions."

Is this strictly true?  Any 401(k) with an employer match gets an exclusion from state tax for the qualified withdrawls attributed to employer contributions?

[JohnB5677 · Accepted solution]

This is true, but be sure to understand what it means.  On most 401Ks the employer will match up to 6% of your salary. 

• If you make $50K per year the company will match $3,000. 
• If you contribute $10K they will still only do $3K. 
• If you do $1K they will match $1K.

The exemption is only for the amount of Employer match.

[si29xnm]

This is very interesting. But how does one know how much of retirement withdrawals are attributable to employer contributions? Especially if I rollover 401k to an IRA. Am I supposed to keep track of employer contributions every year in case I move to Hawaii 20 years from now?

[AmyC]

Yes. You are supposed to track your basis in investments. I want to urge you to create a financial notebook that is kept separate from your tax return. Keep it safe and each year, add your year-end statements from all your financial accounts plus a copy of your W2’s, 5498, and any 8606 forms.

Your W2 shows code D in box 12 to track your investment. Also, make note of your employer contributions for the year in the notebook. Then, earnings are simple to determine.

@si29xnm