Hawaii ~ Personal Income Tax: Tax Rate Changes, New Earned Income Tax Credit, and Food/Excise Tax Credit Changes Enacted

Hawaii legislation has been enacted that changes the personal income tax rates, establishes a state earned income tax credit, and repeals the sunset date for prior amendments made to the food/excise tax credit.

Tax Rates

For taxable years beginning after 2017, 9%, 10%, and 11% tax brackets will return for married taxpayers filing jointly and surviving spouses with taxable income over $300,000, heads of household with taxable income over $225,000, and married taxpayers filing separately and single individuals (other than surviving spouses and heads of household) with taxable income over $150,000. Currently, the top marginal tax rate is 8.25%. Previously, 9%, 10%, and 11% tax brackets were in effect for taxable years 2009 through 2015.

Earned Income Tax Credit

For taxable years beginning after 2017 and before 2023, a qualifying individual may claim a nonrefundable state earned income tax credit equal to 20% of the federal earned income tax credit allowed and claimed on the individual’s federal return. For a part-year resident, the tax credit will be equal to the calculated credit amount multiplied by the ratio of Hawaii adjusted gross income to federal adjusted gross income. A “qualifying individual” is an individual that files a federal return for the taxable year claiming the earned income tax credit under IRC §32 and files a Hawaii return using the same filing status and claiming the same dependents as on the federal return. If the credit exceeds an individual’s tax liability, the excess credit may be carried forward until exhausted. The credit will be disallowed for a period of 10 years after a final administrative or judicial decision that a taxpayer’s claim for the credit was due to fraud, and for a period of two years after a final administrative or judicial decision disallowing a taxpayer’s claim for the credit.

Food/Excise Tax Credit

The sunset date for amendments made by Act 223 (S.B. 555), Laws 2015, to the refundable food/excise tax credit is repealed. Previously, the amendments were scheduled to be repeale,d and the former credit provisions were scheduled to be reenacted, on December 31, 2017.

Act. 107 (H.B. 209), Laws 2017, effective July 10, 2017

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