Hawaii State Taxes: 2023 Update

(May 2024)

Hawaii State Taxes: 2023 Update

In This Article

Do you mind some updates on Hawaii state taxes? You are in the right place, where you can get all you need. Holding on to outdated information on taxes makes you miss out on available benefits and opportunities. Do you even consider getting into trouble with the law? Oh! No. It’s not worth it. Find the 2023 Hawaii State Taxes update here, and save yourself the stress of visiting the tax office for that purpose.

Hawaii’s taxation system comprises a graduated individual income tax, ranging from 1.40% to 11.00%, along with a corporate income tax rate spanning from 4.40% to 6.40%. The state enforces a 4.00% sales tax, with a maximum local sales tax of 0.50%, resulting in an average combined state and local sales tax rate of 4.44%.

This progressive income tax structure in Hawaii differs from the federal system in both the number of brackets and rates. Hawaii features 12 tax brackets, while the federal system has 7, and its top marginal tax rate of 11.00% affects singles earning over $400,000 and married couples with incomes exceeding $800,000. In contrast, the federal top marginal tax rate is 37.00%, applicable to singles with taxable incomes over $523,600 and married couples with incomes over $628,300. Residents can leverage various deductions and credits in Hawaii, some aligning with federal benefits such as the standard deduction, personal exemption, and child tax credit, while others, like the food/excise tax credit, renewable energy technologies credit, and low-income household renters credit, are unique to Hawaii.

This article furnishes you with some information about Hawaii State Taxes for the year 2023.

Sure, you are ready for it! Read on

Hawaii’s State Tax Updates in 2023 include:

  1. Increase of Standard Deduction and Personal Exemption Per Individual
  2. Increases in Specific Tax Credits
  3. Extension of Renewable Energy Technologies Credit
  4. Introduction of New Earned Income Tax Credit
  5. Requirement of Disclosure of Income and Expenses of Real Estate Investment Trusts.

Interested? Let’s dive in!

1. Increase of Standard Deduction and Personal Exemption Per Individual

https://tax.hawaii.gov

An update on Hawaii’s state taxes for 2023 is the increase of the standard deduction for single filers from $2200 to $2,400 and for married filers filing jointly from $4,400 to $4,800. In addition, there is an increment in the personal exemption from $1,144 to $1,200 per person.

The standard deduction is a fixed amount that you can subtract from your taxable income to reduce your tax liability. The personal exemption is an amount that you can subtract for yourself and your dependents to reduce your taxable income. Itemized deductions are specific expenses that you can deduct from your taxable income instead of taking the standard deduction.

You should choose the option that gives you the lowest taxable income and the lowest tax liability. Items that belong to the itemized deductions category include medical and dental expenses, taxes paid, interest paid, charitable contributions, casualty and theft losses, and miscellaneous deductions.

Here in this table are the income tax rates and brackets for the tax year 2023:

Taxable Income

Single

Married Filing Jointly

Married Filing Separately

Head of Household

$0 – $2,400

1.40%

1.40%

1.40%

1.40%

$2,401 – $4,800

3.20%

3.20%

3.20%

3.20%

$4,801 – $9,600

5.50%

5.50%

5.50%

5.50%

$9,601 – $14,400

6.40%

6.40%

6.40%

6.40%

$14,401 – $19,200

6.80%

6.80%

6.80%

6.80%

$19,201 – $24,000

7.20%

7.20%

7.20%

7.20%

$24,001 – $36,000

7.60%

7.60%

7.60%

7.60%

$36,001 – $48,000

7.90%

7.90%

7.90%

7.90%

$48,001 – $150,000

8.25%

8.25%

8.25%

8.25%

$150,001 – $175,000

9.00%

9.00%

9.00%

9.00%

$175,001 – $200,000

10.00%

10.00%

10.00%

10.00%

Over $200,000

11.00 %

11.00 %

11.00 %

11.00 %

Here are some examples of how to apply the tax rates and brackets to different income levels:

  • Example 1: You are single and have a federal adjusted gross income of $50,000 in the tax year 2023. You have no Hawaii adjustments or itemized deductions, so you take the standard deduction of $2,400 and the personal exemption of $1,200. Your taxable income is $46,400 ($50,000 – $2,400 – $1,200). Your tax liability is $3,374, according to the tax table.
  • Example 2: You are married filing jointly and have a federal adjusted gross income of $100,000 in the tax year 2023. You have no Hawaii adjustments or itemized deductions, so you take the standard deduction of $4,800 and the personal exemption of $2,400 ($1,200 x 2). Your taxable income is $92,800 ($100,000 – $4,800 – $2,400). Your tax liability is $6,748, according to the tax table.
  • Example 3: You are head of household and have a federally adjusted gross income of $75,000 in the tax year 2023. You have a Hawaii adjustment of $1,000 for moving expenses and itemized deductions of $10,000 for medical expenses and charitable contributions. You also have one dependent child, so you take the personal exemption of $2,400 ($1,200 x 2). Your taxable income is $61,600 ($75,000 – $1,000 – $10,000 – $2,400). Your tax liability is $4,524, according to the tax rate schedule.

2. Increases in Specific Tax Credits

The latest information regarding state taxes in Hawaii as of 2023 includes the rise of the food/excise tax credit from $110 to $120 per qualified exemption, while the low-income household renters credit rises from $50 to $75 per qualified exemption.

Food/excise tax credit is a credit that helps low-income taxpayers offset the cost of the state sales tax on food and other necessities. You can claim this credit if your federal adjusted gross income is less than $30,000 for single filers, $40,000 for head of household filers, or $50,000 for married filing jointly filers.

Similarly, the low-income household renter credit is a credit that helps low-income renters pay their rent. You could claim this credit if you paid rent for at least six months in Hawaii, you were not claimed as a dependent by another taxpayer, and your federal adjusted gross income is less than $30,000 for single filers, $40,000 for head of household filers, or $50,000 for married filing jointly filers.

3. Extension of Renewable Energy Technologies Credit

Changes to Hawaii’s State Taxes in 2023 include the extension of the renewable energy technologies credit until December 31, 2030.

Renewable energy technologies credit is such that encourage the use of renewable energy sources, such as solar, wind, or geothermal power. You could claim this credit if you installed or purchased a renewable energy system for your home or business in Hawaii. The credit amount is 35% of the actual cost or the applicable cap amount, whichever is less. The cap amount varies depending on the type and size of the system.

4. Introduction of New Earned Income Tax Credit

The latest update on state taxes in Hawaii for 2023 includes the introduction of a new earned income tax credit equal to 10% of the federal earned income tax credit, up to a maximum of $500.

The earned income tax credit is a new credit that helps low-income workers boost their income. You can claim this credit if you earn income from wages, salaries, tips, or self-employment, and you meet certain income and family size requirements.

5. Requirement of Disclosure of Income and Expenses of Real Estate Investment Trusts

Hawaii’s state tax situation update for 2023 is that it is now an obligation for Real Estate Investment Trusts (REITs) doing business in Hawaii to file regular reports and report all finances relevant to their Hawaii real estate holdings.

 

REITs are companies that invest in real estate, mortgages, and real estate-related assets on behalf of their investors. They have favorable tax treatment and must pay out at least 90% of their annual taxable income in dividends.

 

Recent revisions by the Securities and Exchange Commission (SEC) aim to simplify and decrease the financial statements, which are required reports in conjunction with substantial business acquisitions by REITs, which govern the disclosure of revenue and expenses of REITs.

Recap

The Hawaii state tax system has undergone several changes, including an increase in the standard deduction and personal exemption for individuals. Additionally, specific tax credits have been increased, and a new earned income tax credit has been introduced. The tax system also now requires the disclosure of income and expenses for real estate investment trusts. Furthermore, there has been an extension of the renewable energy technologies credit.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. . For comprehensive tax, legal or financial advice, always contact a qualified professional in your area. S’witty Kiwi assumes no liability for actions taken in reliance upon the information contained herein.

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