State Income Taxes in Hawaii
The state of Hawaii has an individual income tax with twelve (12) tax brackets. They range from 1.40% to 11.00%. The highest bracket of 11.00% starts for income greater than $200,000. Here is the breakdown:
- 1.40% anything greater than $0
- 3.20% anything greater than $2,400
- 5.50% anything greater than $4,800
- 6.40% anything greater than $9,600
- 6.80% anything greater than $14,400
- 7.20% anything greater than $19,200
- 7.60% anything greater than $24,000
- 7.90% anything greater than $36,000
- 8.25% anything greater than $48,000
- 9.00% anything greater than $150,000
- 10.00% anything greater than $175,000
- 11.00% anything greater than $200,000
If you spend more than 200 days in Hawaii, you are considered a residence and must file a Hawaii income tax return.
State Business Taxes in Hawaii
The state of Hawaii has a Corporate Tax rate which is also calculated on a marginal scale. The Corporate Tax is only assessed on C Corporation (other flow-thru entities, such as S-Corps, LLCs and LLPs are not subject to the Corporate Tax, but are subject to individual state taxes). The Corporate Income tax ranges from 4.40% to 6.40% and the highest bracket starts at $100,000 broken down as follows:
- 4.40% anything greater than $0
- 5.40% anything greater than $25,000
- 6.40% anything greater than $100,000
Transit Accommodations Tax (TAT)
The state of Hawaii imposes a “hotel tax” on gross receipts of rentals, hotels, motels, etc. Starting on 12/14/2021, the county of Oahu (which includes the city / county of Honolulu) has imposed their own TAT tax (OTAT) as well. The tax rates are as follows:
- State of Hawaii TAT – 10.25% of gross receipts
- Oahu TAT – 3.00% of gross receipts
So if you own a rental in Honolulu, you will pay a total of 13.25% in TAT.
Sales and Property Taxes in Hawaii
Sales Taxes – Like many states, Hawaii has multiple Sales tax rates. One at the state level and another at the local level. The state rate is 4.00% and the average local rate is 0.44% (total average rate for Hawaii Sales Tax is 4.44%) which is a low sales tax compared to most of the country. Sales tax bases define what is taxable and nontaxable. Most states apply the sales taxes to only final retail sales. However, Hawaii’s sales tax has a broad tax base that additionally includes many business-to-business services. (Similar to New Mexico, North Dakota, and South Dakota).
Property Taxes – the average property tax rate for residential property in the state of Hawaii is 0.31%, making it the lowest state in the union as far as Property Tax as a Percent of a taxpayer’s primary residence.
Estate Taxes in Hawaii
The state of Hawaii does have an estate tax that ranges from 10% to 20% depending on the size of the estate. The first $5,490,000 Million dollars of the estate is exempt from tax.
Payroll Taxes in Hawaii
Payroll (Unemployment Insurance) taxes are paid by business on the behalf of their employees to fund unemployment insurance. It consists of multiple factors, such as taxable wage base and UI tax rate. Below is an outline of important factors regarding State Payroll Taxes in Hawaii –
- Wage Base – Hawaii’s wage base of $48,100 (the highest in the country)
- New Employers – UI Contribution Tax is 2.40% for all new employers.
- Education & Training Tax – E&T tax rate is 0.10% for all employers
- UI Rates – range from 0.00% to 5.60%
- Temp Disability Insurance (TDI) Benefits – Hawaii pays TDI for employees who have worked for an employer over 14 weeks. The employer may elect to deduct up to 0.50% from the employees pay to fund the TDI.
Hawaii Business Entities – LLCs
Hawaii is one of the less expensive states in regards to opening an LLC. Here are some important facts:
- Hawaii’s annual LLC fee is $15 a year
- When you register with the state, you pay a one time fee of $50
- Secretary of State of Hawaii – click here