Hawaii · what’s new
What’s new in Hawaii for 2026: a doubled standard deduction, and the federal law arrives
The two things that change the 2026 Hawaii return: the standard deduction nearly doubles under a law passed in 2024, and the Legislature’s May 2026 conformity bill brings the July 2025 federal law into Hawaii, taking the tips deduction and refusing the overtime and car-loan deductions. Also here: the 2027 rate changes already on the books, the solar credit limits, the end of a 2022 credit carryforward, and what to expect on the N-11 compared with last year.
By Charles Trautman, EA, editor
Need to Know Tax · written from Hawaii Department of Taxation sources, November 3, 2026; updated November 12, 2026 after the election · not yet reviewed by a Hawaii practitioner
The bottom line
- The 2026 Hawaii return keeps the twelve brackets, 1.4% to 11%. The standard deduction is $8,000 single and $16,000 joint.
- Hawaii follows the federal tips deduction, up to $25,000, but not the overtime or car-loan interest deductions.
- For 2027 the law is already changed (Act 24): the 3.2% rate becomes 2.5%, the 5.5% rate becomes 5%, and a new 13% rate applies above $500,000 single, $750,000 head of household and $1,000,000 joint.
- From 2027 the solar credit is unavailable above $175,000 of AGI single or $350,000 joint, and it ends after 2029.
For most Hawaii filers the 2026 return is better than the 2025 return by one number. The standard deduction rises from $4,400 to $8,000 for a single filer, from $8,800 to $16,000 on a joint return, and from $6,424 to $12,000 for a head of household, the second step of Act 46 of 2024. The twelve brackets, 1.4% to 11%, did not move; they widened last year and stay put until 2027. Behind that headline, Act 35 of 2026 moved Hawaii’s link to the federal tax code forward to December 31, 2025, so the 2026 return is the first to feel the July 2025 federal law. Hawaii took the deduction for tips. It refused the deductions for overtime and car-loan interest. The federal $6,000 senior deduction never reaches Hawaii at all, because Hawaii uses its own $1,144 exemptions in place of the federal ones.
Nothing in this article is indexed for inflation. Hawaii does not index its brackets, deductions, exemptions or credits, so every figure here is one the Legislature wrote down, and every change is one it voted on. That is why the standard deduction jumps in steps rather than creeping, and why the 2027 changes described below are already settled law rather than a forecast.
The standard deduction nearly doubles
Act 46 (2024) set a schedule for the standard deduction that climbs every two years through 2031. The 2026 step is the biggest. The Department of Taxation’s Announcement 2024-03 lays out the whole ladder, and Act 35 (2026) re-enacted the same figures in the statute.
| Tax years | Single or MFS | Head of household | Joint or surviving spouse |
|---|---|---|---|
| 2024–2025 | $4,400 | $6,424 | $8,800 |
| 2026–2027 | $8,000 | $12,000 | $16,000 |
| 2028–2029 | $9,000 | $13,500 | $18,000 |
| 2030 | $10,000 | $15,000 | $20,000 |
| 2031 and after | $12,000 | $18,000 | $24,000 |
Source: Department of Taxation Announcement 2024-03 and HRS 235-2.4(a)(2) as re-enacted by Act 35 (2026). Hawaii has no extra standard deduction for age or blindness; the age break is a second $1,144 personal exemption at 65.
The extra $3,600 of deduction for a single filer, or $7,200 on a joint return, comes off income that would otherwise be taxed in the 6.8% to 7.9% range for most working households, so the saving is roughly $250 to $550 per return. The 2026 withholding tables in Booklet A were rebuilt around the new deduction, effective December 5, 2025 (Announcement 2025-07), so paychecks since January already reflect it. A filer who had a Hawaii refund last year and the same income this year should expect a refund of about the same size, not a bigger one; the saving arrived through the year in slightly larger paychecks.
Worked example: the same income, 2025 and 2026
A single renter with $60,000 of federal AGI and nothing else going on takes the standard deduction and one personal exemption of $1,144. The brackets are identical in both years; only the deduction changed.
| 2025 return | 2026 return | |
|---|---|---|
| Federal AGI | $60,000 | $60,000 |
| Standard deduction | −$4,400 | −$8,000 |
| Personal exemption | −$1,144 | −$1,144 |
| Hawaii taxable income | $54,456 | $50,856 |
| Tax on the first $48,000 (through the 7.2% bracket) | $2,539 | $2,539 |
| Tax at 7.6% on the rest | $491 | $217 |
| Hawaii income tax | $3,030 | $2,756 |
| Saving from the larger deduction | $274 |
A married couple with $120,000 of AGI and two exemptions saves $547 the same way: the extra $7,200 of deduction comes off income taxed at 7.6%. Bracket figures are from the Act 46 schedules for 2025–2026 in Announcement 2024-03.
Act 35: the federal law of 2025 reaches Hawaii
Hawaii adopts the Internal Revenue Code as of a fixed date and moves the date forward by a bill each session. The 2025 return was built on the code as of December 31, 2024, so the federal law signed in July 2025 did not touch it. House Bill 2329, signed as Act 35 on May 26, 2026, moves the date to December 31, 2025 for tax years beginning after that date. The 2026 return is where the federal changes land, and Act 35 decides which ones Hawaii accepts.
| Federal provision | Hawaii treatment | Where it stands |
|---|---|---|
| Deduction for qualified tips, up to $25,000 (IRC 224) | Adopted | Announcement 2026-06 lists it among the provisions Hawaii conforms to. How the 2026 N-11 carries it is not yet published. |
| Deduction for qualified overtime, up to $12,500 (IRC 225) | Rejected | Non-operative under HRS 235-2.3(b). Overtime premiums are taxed in full by Hawaii. |
| Deduction for passenger-vehicle loan interest, up to $10,000 (IRC 163(h)(4)) | Rejected | Non-operative under HRS 235-2.4(i). |
| $6,000 senior deduction (added to IRC 151) | Never applies | IRC 151 has been non-operative in Hawaii for decades; Hawaii uses its own $1,144 exemptions, doubled at 65. |
| Federal SALT cap raised to $40,000 (IRC 164(b)(6)) | Not applicable | Hawaii has never followed the federal cap. Hawaii’s own rule: the state and local income tax deduction is allowed only below $100,000 single / $150,000 HOH / $200,000 joint of federal AGI. |
| Charitable deduction for non-itemizers (IRC 170(p)) | Adopted | Announcement 2026-06 lists it as conformed. Mechanics on the N-11 to come. |
| Trump accounts (IRC 128, 139J, 530A) | Adopted | Employer-contribution exclusion up to $2,500 and the beneficiary exclusion, per Announcement 2026-06. |
| 100% bonus depreciation (IRC 168(k)) and production-property expensing (168(n)) | Rejected | Non-operative, as bonus depreciation has long been. Hawaii depreciation is figured separately. |
| Immediate domestic research expensing (IRC 174A) | Rejected | Non-operative; Hawaii keeps IRC 174 as of December 31, 2024. |
| Scholarship-granting-organization exclusion (139K), rural agricultural loan interest (139L), farmland sale installment rule (1062) | Rejected | Non-operative. |
| Permanent repeal of miscellaneous itemized deductions (IRC 67), entertainment deduction (274), personal casualty losses outside declared disasters (165(h)(5)), bicycle-commuting exclusion (132(f)) | Adopted | Hawaii had decoupled from the 2018–2025 suspension of miscellaneous deductions; from 2026 it follows the federal repeal, per Announcement 2026-06. |
The bill text (HB 2329 CD1) and the Department’s Announcement 2026-06 agree on this list. The one open question is form mechanics: the Department had not released the 2026 N-11 instructions as of early November 2026.
The tips deduction is the item most Hawaii workers will notice. A server, bartender or stylist who qualifies for the federal deduction should see the same tips come off Hawaii income for 2026, which at Hawaii’s rates is worth more than most people expect. The overtime deduction is the item they will notice is missing: a nurse or firefighter who deducts $8,000 of overtime premium federally still pays Hawaii tax on all of it.
Worked example: a tipped worker’s 2026 Hawaii return
A single restaurant server with $34,000 of wages and $14,000 of reported tips, all of it qualifying for the federal tips deduction. Hawaii adopted the deduction; the arithmetic below assumes the tips come off Hawaii income the way they come off federal, before the standard deduction and exemption, which is the natural reading of Act 35 but not yet confirmed by a form (verify).
| If Hawaii had rejected the tips deduction | Under Act 35 | |
|---|---|---|
| Wages and tips | $48,000 | $48,000 |
| Tips deduction | $0 | −$14,000 |
| Standard deduction | −$8,000 | −$8,000 |
| Personal exemption | −$1,144 | −$1,144 |
| Hawaii taxable income | $38,856 | $24,856 |
| Hawaii income tax | $1,881 | $917 |
| Hawaii tax saved by the tips deduction | $964 |
The tax figures use the 2025–2026 Act 46 schedule for single filers: $1,675 on the first $36,000 plus 7.2% of the excess, or $859 on the first $24,000 plus 6.8% of the excess. Had the same $14,000 been overtime premium instead of tips, the Hawaii tax would stay at $1,881.
Withholding already changed
The Department amended its withholding rule (HAR 18-235-61-06) effective December 5, 2025 to put the higher 2026 standard deduction into the Booklet A tables. Employers using the new tables have been withholding less Hawaii tax since January. Employees did not need to file a new HW-4, but anyone who padded their HW-4 in past years to force a refund may want to recheck it, because the tables now do part of that work. Retirees should note what did not change: Hawaii still has no withholding on pensions, IRAs or annuities for 2026. Act 118 (2026) creates a voluntary election to have Hawaii tax withheld from 1099-R distributions, but only for tax years beginning after December 31, 2026, with rules still to come from the Department. For 2026 the only way to pay Hawaii tax on an IRA distribution during the year is an estimated payment on Form N-200V.
Act 24: the 2027 rate schedule, enacted now
Senate Bill 3125, signed May 21, 2026 as Act 24, rewrites the bracket step that Act 46 had scheduled for 2027. It is not a 2026 item, but it changes 2027 withholding and estimates, and it is the reason a high-income filer’s 2027 safe-harbor estimate should not be built on 2026 tax.
- The lower brackets still widen as Act 46 planned: for a single filer the 1.4% bracket grows from $9,600 to $14,400, and the other low brackets shift up with it (joint figures are double, head of household one-and-a-half times).
- The second and third rates fall from 3.2% and 5.5% to 2.5% and 5%.
- The 11% rate stays where it is in 2026, starting at $325,000 single, $487,500 head of household and $650,000 joint, instead of moving up to $400,000 / $600,000 / $800,000 as Act 46 had scheduled.
- A new 13% bracket starts at taxable income over $500,000 single or married filing separately, $750,000 head of household and $1,000,000 joint.
The Department’s estimate to the Tax Review Commission put the net revenue effect at about $87 million in the first full fiscal year: roughly $20 million given back through the lower second and third rates, and $106 million raised by the 13% bracket.
Act 24 also narrows the solar credit
The renewable energy technologies income tax credit, 35% of a residential solar system up to $5,000, claimed on Form N-342, is on a schedule to disappear. Under Act 24 as the Department reads it in Announcement 2026-06: credits must be certified by the Hawaii State Energy Office under an annual statewide cap of $40 million for 2027 through 2030; from tax year 2027 the credit is unavailable above $175,000 of AGI single or $350,000 joint; and no credit is allowed for tax years beginning after December 31, 2029. The bill makes section 1 retroactive to tax years beginning after December 31, 2025, with the income-limit language starting in 2027, so a system placed in service in 2026 is not caught by the income limit, but whether the certification process applies to 2026 installations is a question for the 2026 N-342 instructions (verify). Anyone planning a rooftop system should know the credit is ending and the rules tighten each year.
Smaller items on the 2026 return
The 2022 EITC carryforward ends. Hawaii’s earned income credit was nonrefundable through 2022 with an unlimited carryforward. Act 25 (2025) cut off the carryforward: the 2022 credit cannot be used for tax years beginning after December 31, 2025, so 2025 was the last return it could appear on. The credit itself, 40% of the federal EITC and refundable (verify sunset), is unchanged.
Individual Housing Accounts get bigger, from 2027. Act 217 (2026) raises the annual deduction for first-home IHA contributions from $5,000 to $20,000 single and from $10,000 to $40,000 joint, and the lifetime cap from $25,000 to $200,000, for tax years beginning after December 31, 2026. The 2026 limit is still $5,000.
General excise tax. The GET exemption for medical services paid by Medicaid, Medicare and TRICARE took effect January 1, 2026 (Act 47, 2024) (verify). Nothing changed in the 4% state rate or the 0.5% county surcharge.
Transient accommodations tax. The TAT rose from 10.25% to 11% on January 1, 2026 under Act 96 (2025). An owner who rents a unit to visitors for under 180 days pays it on top of GET; it is not on the income tax return but it is on the owner’s 2026 books.
No ballot measure. There is no tax question on Hawaii’s November 3, 2026 ballot. Hawaii has no citizen initiative, so the 2027 rate changes were never going to be a vote; they are Act 24, already law. The governor’s race decides who administers it.
Behind the scenes: why Hawaii splits the federal deductions
Hawaii computes its own taxable income. It starts from federal AGI, then applies its own standard deduction, its own exemptions and its own itemized-deduction rules, and it keeps a long list of federal code sections that are “not operative” for Hawaii purposes. When a new federal deduction arrives, the Legislature has to decide, section by section, whether to add it to that list. Act 35 added overtime and car-loan interest to the list and left tips off it; the Department’s own testimony on the bill had recommended conforming to the tips deduction. The senior deduction never came up because it lives inside the federal exemption section Hawaii replaced long ago with its own. The result is that a Hawaii W-2 worker can have one new federal deduction count and the other not, on the same return.
What to bring
- Last year’s N-11, to see the standard deduction and withholding change line by line
- Every 2026 W-2; the tips box matters now for Hawaii, and the overtime figure does not
- Form 1099-R for any IRA, 401(k) or annuity distribution, with the estimated payments made against it
- Confirmations of 2026 estimated payments made on Hawaii Tax Online or with Form N-200V
- For a solar installation in 2026: the contract, the placed-in-service date and the installer’s cost statement for Form N-342
- For a short-term rental: GET and TAT filings for 2026, showing the 11% rate from January
Questions people ask
Did Hawaii’s tax rates go down for 2026?
No. The twelve rates and the bracket lines are the same as 2025. What went down is taxable income, because the standard deduction nearly doubled. For most filers that is worth $250 to $550 of tax. The rates themselves change in 2027 under Act 24: two low rates fall, and a 13% rate appears above $500,000 single / $1,000,000 joint.
Does Hawaii follow “no tax on tips” and “no tax on overtime”?
Tips yes, overtime no. Act 35 (2026) adopted the federal tips deduction for the 2026 Hawaii return and expressly rejected the overtime deduction. The Department had not published the 2026 N-11 line for the tips deduction as of November 2026.
I am 67. Do I get the $6,000 senior deduction on my Hawaii return?
No. That deduction is part of the federal personal-exemption section, which Hawaii does not use. Hawaii gives you a second $1,144 exemption at 65 instead, worth at most about $126 of tax. Social Security and employer-funded pensions are exempt in Hawaii regardless of age; IRA and 401(k) distributions are taxed in full.
My Hawaii withholding dropped in January 2026. Is that right?
Yes. The Department rebuilt the withholding tables around the $8,000 / $16,000 / $12,000 standard deduction, effective December 5, 2025. Less tax withheld during the year means the tax cut arrived in paychecks rather than as a bigger refund.
Can I have Hawaii tax withheld from my IRA distributions?
Not for 2026. Act 118 (2026) creates a voluntary withholding election on 1099-R income starting with tax years that begin after December 31, 2026. For 2026, make estimated payments on Form N-200V or through Hawaii Tax Online if the distribution will leave you owing $500 or more.
Is the solar credit gone?
Not yet. It survives for systems placed in service through tax year 2029, but Act 24 caps the statewide total at $40 million a year for 2027–2030, requires certification by the State Energy Office, and from 2027 denies it to filers above $175,000 single / $350,000 joint of AGI. A 2026 installation is under the old income rules; check the 2026 Form N-342 instructions for the certification step.
One number doubled, one law arrived
Expect a smaller taxable income from the $8,000 / $16,000 / $12,000 standard deduction, a Hawaii tips deduction but no overtime deduction, and a 2027 rate schedule that is already written.
Written by Charles Trautman, EA, editor · Need to Know Tax, Lone Tree, Colorado
Questions about this article in Hawaii are answered by [your practice name] · [your phone] · [your email address]. We’re looking for an EA or CPA in each Hawaii city to hold that city’s seat and take this spot — is that you?
An invitation to Hawaii EAs and CPAs
These Hawaii pages were written by the editor from the Hawaii Department of Taxation’s own publications, and they need a Hawaii practitioner’s eye. One enrolled agent or CPA in each Hawaii city holds that city’s seat: reads these pages before the filing season and is credited as a reviewer, is named on every page of their city’s edition, and answers its readers’ questions. $1,000 for the 2026 season, the charter price. Take your city’s seat (a two-minute form and a card), tell us you’re interested, write to editor@needtoknowtax.com, or read how it works.
Forms and official pages named in this article
Sources and where to check
- Department of Taxation Announcement 2024-03: Act 46 (2024), standard deduction and bracket schedules through 2031
- Department of Taxation Announcement 2025-07: withholding tables for tax years beginning after December 31, 2025
- Department of Taxation Announcement 2026-06: tax law changes from the 2026 legislative session (Acts 24, 35, 118, 217)
- HB 2329 CD1 (Act 35, 2026): conformity to the Internal Revenue Code
- Governor’s Message 1135: HB 2329 signed as Act 35, May 26, 2026
- SB 3125 CD2 (Act 24, 2026): 2027 rate schedules and renewable energy credit limits
- SB 2881 CD1 conference committee report (Act 118, 2026): voluntary withholding on 1099-R income
- Department of Taxation, Tax Review Commission legislative update, May 2026 (Act 24 revenue estimates)
- Department of Taxation: 2026 employer payroll updates