📅 2026 Update: Changes in Hawaii State Tax Laws

Since the original article was published, Hawaii has made significant changes to its tax laws. Act 50, SLH 2023, was enacted on June 1, 2023, introducing a new Pass-Through Entity Tax (PTET). This aligns Hawaii with several other states that have adopted similar taxes aimed at businesses.

The older article continues further down the page, providing foundational information on Hawaii state tax.

🏛️ New Pass-Through Entity Tax

Hawaii's new PTET allows certain entities to pay taxes at the entity level rather than passing the tax burden to individual owners. This is similar to the existing entity-level tax in Illinois. This tax can potentially offer benefits for businesses, as it may reduce the overall tax burden for owners.

📊 Other States Following Suit

Since 2023, multiple states, including Iowa, Indiana, and Kentucky, have also passed similar PTET laws. This trend shows a growing interest among states to adopt these taxes as a way to simplify taxation for businesses and generate revenue.

🏢 Impacts on Business Owners

The introduction of PTET in Hawaii may change how business owners file their taxes. Those affected by this tax should be aware of the new requirements and consider how it impacts their overall tax strategy. Understanding these changes is crucial for compliance and financial planning.

📅 Important Deadlines

Tax deadlines can vary with the introduction of new laws. Business owners should stay informed about filing dates related to the PTET and any other changes that could affect their tax obligations in Hawaii.

📌 Key Takeaways

  • Hawaii enacted a new Pass-Through Entity Tax.
  • Several states have followed with similar legislation.
  • The PTET impacts how business owners file taxes.
  • Stay informed about deadlines and requirements.

💡 Tips for Managing Your Hawaii State Taxes

Reviewing your tax situation is important, and discussing it with an attorney can help clarify your options. Understanding the new changes in Hawaii state tax is essential for effective tax management.

📝 Understand the PTET

Be aware of the new Pass-Through Entity Tax in Hawaii. This tax allows businesses to pay taxes at the entity level, which may simplify tax filing for owners.

📆 Keep Track of Deadlines

With changes in tax laws, it's crucial to keep an eye on deadlines. Missing a deadline could lead to penalties or missed opportunities for deductions.

💼 Review Your Business Structure

Consider how the PTET might impact your business structure. Different business forms may have different tax implications, so it's important to evaluate your options.

📊 Use Free Resources

Take advantage of free government and nonprofit resources. Organizations like the IRS Free File and Volunteer Income Tax Assistance (VITA) can provide valuable support.

🔍 Stay Updated on Changes

Tax laws can change frequently. Regularly check official state resources for updates to ensure you are compliant with the latest regulations.

📑 File the Correct Forms

Ensure you are using the correct forms for your tax filings. For example, partnerships must file Form 1065, while those affected by the new PTET should review their specific requirements.

🏆 Tax Services Ranked by User Reviews (2026)

This section highlights tax services relevant to Hawaii state taxes based on their user reviews. The rankings are based on Trustpilot data collected in October 2026. While star ratings provide insight, they are just one measure of a service's quality, as unhappy customers often leave more reviews.

🥇 1. Libre Tax Service

Libre Tax Service has been rated 4.1 on Trustpilot. It is known for its online tax preparation and IRS audit defense services. Some users find the website navigation challenging, which can impact the overall experience.

🥈 2. Jackson Hewitt Tax Service

Jackson Hewitt Tax Service holds a Trustpilot score of 4.2. This service is recognized for its nationwide tax preparation services. However, some customers have complained about the responsiveness of customer service, which could affect timely assistance.

🥉 3. TaxSlayer

TaxSlayer averages a score of 4.0 on Trustpilot. It is known for its online tax preparation software at affordable prices. Users have reported occasional software glitches that may disrupt the filing process.

4️⃣ KBO Tax & Accounting Services

KBO Tax & Accounting Services has a Trustpilot rating of 4.5. This service offers nationwide tax preparation along with bookkeeping and accounting services. However, it has limited in-person office locations, which might not suit everyone.

5️⃣ Advanta Tax

Advanta Tax has a score of 4.3 on Trustpilot. It provides nationwide tax services, including assistance with IRS resolution and state tax debt. Some clients have experienced delays in service, which can be frustrating during busy tax seasons.

6️⃣ SMAART Tax

SMAART Tax holds a Trustpilot score of 4.4. Known for its virtual tax services, it serves all 50 states. While it primarily operates online, this limits in-person consultations, which some clients may prefer.

🆓 Free Tax Assistance Options

Free assistance is available for those who need help with tax preparation. The IRS Free File offers free tax preparation services for eligible taxpayers, while the Volunteer Income Tax Assistance (VITA) program provides support for those who might struggle with their filings.

🔎 What to Compare When Choosing Tax Services

  • 📊 User ratings on platforms like Trustpilot
  • 🔍 Service offerings relevant to your tax needs
  • 💬 Customer service responsiveness
  • 💰 Pricing structure and additional fees
  • 🏢 Availability of in-person vs. virtual services

❓ Frequently Asked Questions

❓ What is the Pass-Through Entity Tax in Hawaii?

The Pass-Through Entity Tax (PTET) in Hawaii allows certain businesses to pay taxes at the entity level rather than passing the tax burden to individual owners.

📆 Are there specific deadlines for filing the PTET?

Yes, businesses should be aware of deadlines related to the PTET. Missing these deadlines can result in penalties.

📝 What forms do partnerships need to file?

Partnerships in Hawaii must file Form 1065 with the IRS center designated for their state. This form reports income, deductions, and other relevant information.

💼 How can businesses benefit from the PTET?

The PTET may reduce the overall tax burden for business owners, simplifying their tax filings and potentially leading to a lower effective tax rate.

🏢 Where can I find free tax assistance?

Free tax assistance is available through resources like the IRS Free File program and the Volunteer Income Tax Assistance (VITA) program, providing support for those in need.

🔍 How do I stay updated on tax law changes?

To stay informed about tax law changes, regularly check official state resources and IRS announcements for the latest updates.

⚖️ Recent Court Cases Related to Hawaii State Taxes

Recent court rulings may affect Hawaii state taxes, particularly regarding new laws like the PTET. The following cases highlight important legal interpretations and changes in tax law practices.

For more information, you can browse more rulings on the news page.

End of October 2026 Update






There are a number of taxes applicable to the state of Hawaii, which includes a state sales tax, income tax, and other taxes.


Hawaii state sales tax – Hawaii does not have a sales tax at the point of sale, but rather has an excise tax, paid by sellers, which are passed on to consumers in the price of goods.  This tax applies to almost all transactions, including rent, medical services, and food.  Contact Hawaii lawyers for legal advice and assistance.


Hawaii personal income tax 

Hawaii State Tax

Hawaii uses a graduated tax system, where income which is as follows:


Income range between $0 and $2,400          1.4%.


Income range between $2,401 and $4,800      3.2%.


Income range between $4,801 and $9,600      5.5%.


Income range between $9,601 and $14,400     6.4%


Income range between $14,401 and $19,200    6.8%.


Income range between $19,201 and $24,000    7.2%.


Income range between $24,001 and $36,000    7.6%.


Income range between $36,001 and $48,000    7.9%.


Income range $48,001 and over   8.25%.


Hawaii property taxes


- Fund local governments but approved by state


-Property tax rates vary depending on the island the property is on and the type of property.


-The rate can range anywhere between 3.42% for residential property to 12.40% for commercial and hotel properties.


Hawaii special excise taxes


Taxes assessed on vehicles, alcohol, tobacco, gasoline and are in addition to federal excise taxes.


- Funds health programs and other related activities


- $3.00 tax on every pack of cigarettes


- $5.98 tax per gallon of liquor


Hawaii inheritance tax 


Hawaii has just instituted a new inheritance tax, which went into effect on April 30, 2010.  The inheritance tax only affects estates with a value of over $3.6 Million.  Any amounts over $3.6 Million is taxed at a graduated rate, which begins at .8% and can be as high as 16% for estates over $10.1 Million.


Hawaii payroll taxes


State Disability Insurance – .50% withheld with a maximum of $4.42


State Unemployment Insurance – 1.22% - 5.42%


Exemptions


Certain exemptions for


- Military personnel and veterans


- Persons age 65 and older


- Low income tax credits


- Qualified child tax credits


Taxable income


Gross income is defined as all income from whatever source derived, including but not limited to:


- Wages


- Salaries


- Commissions


- Stock Gains


- Dividends


- Royalties income


- Rental income


- Business income


- Inheritance


- Pensions


- Annuities


- Partnership/shareholder income


- Gain from sale of property


Corporate income tax


Hawaii has different levels of corporate income tax rates ranging from 4.4% to 6.4%


Misc


Hawaii has the highest income tax rates in the nation, with the highest pay rates paying 11% for income over $200,000.


Hawaii is one of the very few states that does not have a point of sale tax, but instead has a gross receipts tax, which taxes everything before reaching the consumer.  Many claim that this form of taxation makes for a much higher actual tax rate, as items may be taxed multiple times through the stream of commerce.  All items may be subject to the gross receipt tax, even necessities such as medical services and housing.

Introduction

Hawaii is not just a beautiful tourist destination; it is also known for its unique tax system. The state has one of the highest income tax rates in the country, but it also offers some benefits that residents and businesses can take advantage of. In this article, we will look at Hawaii's state tax system in detail, including income tax, property tax, sales tax, and other taxes imposed by the state.

Hawaii Income Tax

Hawaii has a progressive income tax system that ranges from 1.40% to 11% for individuals and 6.4% to 11% for corporations. The state's income tax rates are among the highest in the country. The top marginal income tax rate of 11% applies to taxable income over $400,000 for individuals and $800,000 for married couples filing jointly.

Hawaii uses a standard deduction and personal exemption system for individual income tax. The standard deduction is $2,200 for single filers, $4,400 for married couples filing jointly, and $3,050 for heads of household. The personal exemption is $1,144 per taxpayer, spouse, and dependent.

The state also offers various credits and deductions to lower the overall tax liability. For example, taxpayers can claim a credit for contributions to a Hawaii college savings program, a credit for adopting a child, and a credit for high technology businesses.

📝 See Also

Hawaii Property Tax

Hawaii's property tax is based on the assessed value of the property. The county assessors determine the assessed value of the property, and the county council sets the property tax rates. The tax rate varies by the county, and it is generally lower in rural areas than in more densely populated areas like Honolulu.

The state has a homeowner's exemption, which applies to the primary residence of the homeowner. The exemption amount varies by county but is generally around $50,000. The state also offers a few other exemptions, such as the disabled veteran's exemption and the blind exemption.

Hawaii Sales Tax

Hawaii does not have a state-level sales tax system. However, it has a general excise tax (GET), which is a business tax that applies to the gross income of businesses. The GET is imposed on both the retail and wholesale sale of goods and services.

The general excise tax rate is 4% for most businesses and 0.5% for wholesale transactions. However, some businesses, such as those involved in the sale of alcohol, tobacco, and rental cars, are subject to higher rates.

Compared to a traditional sales tax, the GET can be more burdensome for businesses. It applies to all business income, regardless of the profitability or loss of the business. Moreover, the tax is levied at every stage of production and distribution, which can increase the overall cost of goods and services.

Other Taxes

In addition to income, property, and GET, Hawaii also imposes several other taxes and fees.

Transient Accommodations Tax: Hawaii's transient accommodations tax (TAT) imposes a tax on the gross rental income of transient accommodations. The tax rate is 10.25%, and it applies to hotels, motels, vacation rentals, and other accommodations.

Fuel Tax: The state also imposes a fuel tax on gasoline and diesel. The tax is currently $0.16 per gallon of gasoline and $0.18 per gallon of diesel.

Cigarette Tax: Hawaii has the third-highest cigarette tax in the country, with a rate of $3.20 per pack of 20 cigarettes.

Alcohol Tax: Hawaii also imposes a tax on alcohol. The tax rate varies by type of alcohol, but it ranges from $0.54 per liter of beer to $5.98 per liter of distilled spirits.

Conclusion

Hawaii's tax system is unique, and it can be complex for residents and businesses to navigate. The state imposes high income tax rates and has a general excise tax system that can be more burdensome for businesses than a traditional sales tax. However, the state also offers various credits and deductions to lower the overall tax liability.

The property tax rate varies by county, and the state has several exemptions to reduce the tax burden on homeowners. Hawaii's transient accommodations tax, fuel tax, cigarette tax, and alcohol tax are also significant sources of revenue for the state.

When it comes to tax planning, individuals and businesses in Hawaii must take a holistic approach to optimize their tax liability. Working with a tax professional can help taxpayers navigate the state's tax system and take advantage of all the available opportunities to minimize their tax obligation.