Bank Gap by State
The Bank Gap in Hawaii
Hawaii combines one of the highest state income-tax rates in the country with, by a wide margin, the highest cost of living, which compounds the Bank Gap on both the tax side and the balance-size side at once.
Last reviewed August 7, 2026 · SwitchWize Research Desk
Before HI tax
$1,005/yr
on a $25,000 balance
After HI 11% tax
$894/yr
recoverable by switching
On a $25,000 balance, the gap is about $1,005 a year before tax. After Hawaii's 11% top income-tax rate on the additional interest, you keep about $894. Because Treasury interest is exempt from Hawaii income tax, routing that cash through a state-tax-exempt Treasury vehicle can recover most of the difference.
Estimated Bank Gap by balance
| Balance | Current earnings | Better-fit earnings | Estimated Bank Gap | After HI tax |
|---|---|---|---|---|
| $5,000 | $19 | $220 | $201 | $179 |
| $10,000 | $38 | $440 | $402 | $358 |
| $25,000 | $95 | $1,100 | $1,005 | $894 |
| $50,000 | $190 | $2,200 | $2,010 | $1,789 |
| $100,000 | $380 | $4,400 | $4,020 | $3,578 |
Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. The "After HI tax" column applies HI's 11% top income-tax rate to the additional interest; federal tax applies on top and is not shown. Example only — your result depends on your balance, rates, and time horizon.
Why Hawaii changes the math
Hawaii taxes interest income at a top rate of 11.0%, spread across more income brackets than almost any other state. Treasury interest is generally exempt from that tax, so the after-tax case for T-Bills or a government money market fund over a fully taxable account is strong for higher-income Hawaii savers.
The nation's highest cost of living means a Hawaii emergency fund is typically a much larger dollar figure than the national norm, which makes the Bank Gap on that balance correspondingly larger than almost anywhere else.
Cost of living in Hawaii is the highest in the nation by a wide margin, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.
Because Hawaii taxes savings interest but not Treasury interest, the highest after-tax yield is not always the highest headline APY. Run your tax profile through the short-term savings tool to see whether a Treasury bill or government money market fund beats a taxable account for you.
Open the short-term savings toolFrequently asked questions
Does Hawaii tax high-yield savings account interest?
Is a high-yield savings account worth it in Hawaii?
Are T-Bills better than a HYSA for Hawaii savers?
Your personal Bank Gap
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Calculate my Bank GapEducational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.