All Roll Calls
Yes: 197 • No: 8
HawaiiHB 23292025–2026 Regular Session (Year 2)HouseWALLET
RELATING TO CONFORMITY TO THE INTERNAL REVENUE CODE.
Sponsored By: Nadine K. Nakamura (Democratic)
Signed by Governor
Summary
Conforms Hawaii income and estate and generation-skipping transfer tax laws to the Internal Revenue Code of 1986, as amended as of December 31, 2025. Effective 7/1/2050. (SD1)
Conformity to the Internal Revenue Code for 2025Income TaxEstate and Generation-Skipping Transfer TaxWAM
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Bill Overview
Analyzed Economic Effects
22 provisions identified: 5 benefits, 11 costs, 6 mixed.
Hawaii Raises Standard Deductions
For Hawaii tax years starting after December 31, 2025, the standard deduction is $16,000 for joint filers and surviving spouses, $12,000 for heads of household, and $8,000 for single or separate filers. After December 31, 2027, the amounts rise to $18,000, $13,500, and $9,000. After December 31, 2029, they rise to $20,000, $15,000, and $10,000. After December 31, 2030, they rise to $24,000, $18,000, and $12,000, in the same filing-status order.
New Deductions for Property and Car Taxes
For Hawaii tax years starting after December 31, 2025, eligible taxpayers can deduct real property taxes, disaster losses, or motor vehicle sales taxes. Each deduction follows its federal eligibility rules. The law does not state how much a household can deduct.
State and Local Tax Deductions Stay Available
For Hawaii tax years starting after December 31, 2025, eligible individuals can claim these state and local tax deductions without the specified federal limits. Federal adjusted gross income must be below $100,000 for single or separate filers, $150,000 for heads of household, or $200,000 for joint filers and surviving spouses. Corporations cannot claim these deductions. You cannot deduct amounts covered by the Hawaii tax credit under section 235-55.
Limits on Itemized and Disaster Deductions
For Hawaii tax years starting after December 31, 2025, the state limits some itemized deductions using a rule from December 31, 2024, and federal tax-year 2009 thresholds. Hawaii also applies a limit to personal casualty losses that are not tied to a federally declared disaster. The law does not state a household’s deduction amount.
New Hawaii Taxes on Retirement Payments
Beginning January 1, 2026, Hawaii taxes covered lump-sum payments from employees’ trusts at a rate set under state tax rules. The state also uses a federal transition rule when administering certain deferred compensation tax rules. The law does not state a specific rate or individual tax change.
Overtime Pay Gets No Hawaii Tax Break
Beginning January 1, 2026, Hawaii does not apply the specified federal tax treatment to qualifying overtime pay. Workers cannot use that treatment when calculating their Hawaii income tax. The law does not state the amount of any tax increase.
Public Workers Pay Tax on Retirement Credits
Beginning January 1, 2026, Hawaii taxes pre-tax annuity or deferred compensation funds used solely to obtain retirement credits in the State Employees’ Retirement System. The funds must have been distributed from the annuity or plan. The rule applies to taxable years beginning after December 31, 2025.
Tax Rules Change for Education Savings
For Hawaii tax years starting after December 31, 2025, the state does not apply the specified federal tax rule for scholarships covering eligible elementary or secondary school expenses. Hawaii also excludes three specified federal rules for qualified tuition accounts. For Coverdell education accounts, Hawaii uses the federal modified income measure to set the state maximum contribution. The law does not state the tax or contribution amounts for a household.
Farmland Sales Lose Federal Tax Treatment
Beginning January 1, 2026, Hawaii does not apply the specified federal tax treatment to gains from qualified farmland sold or exchanged to a qualified farmer. Affected taxpayers cannot use that treatment when calculating Hawaii income tax. The law does not state the amount of any tax increase.
Hawaii Updates Federal Income Tax Rules
For Hawaii tax years starting after December 31, 2025, the state generally uses federal income tax rules updated through December 31, 2025. Hawaii exceptions and limits still apply, so not every federal rule applies to state taxes. The law does not state one tax change for all households.
Businesses Face Changed Equipment and Research Rules
For Hawaii tax years starting after December 31, 2025, businesses cannot use the federal special allowance for qualifying production property. They use the research expense rule as it existed on December 31, 2024, rather than the newer domestic research rule. Businesses can use special expensing rules for qualifying disaster assistance property. Hawaii also uses its general conformity date for business entertainment and related expenses. The law does not state the tax effect for a particular business.
ABLE Account Distributions Avoid Added Tax
For Hawaii tax years starting after December 31, 2025, the state does not apply the specified federal additional tax to distributions from qualified ABLE accounts. The change applies to taxpayers who receive those distributions. The law does not state the amount of tax saved.
More Cooperatives Qualify for Hawaii Tax Treatment
Starting with Hawaii tax years after December 31, 2025, qualifying cooperatives do not have to be organized in Hawaii to receive the specified state tax treatment. They must still meet Hawaii’s cooperative requirements. The law does not state the tax benefit amount.
Hawaii Updates Estate and Trust Taxes
For deaths or transfers after December 31, 2025, Hawaii updates the federal rules used for state estate and generation-skipping transfer taxes, subject to state limits. Hawaii also taxes designated settlement funds at the state’s maximum estate and trust tax rate for the year. The law does not state a rate or household tax amount.
No Hawaii Tax Break for Car Interest
Beginning January 1, 2026, Hawaii does not apply the specified federal tax treatment to qualifying passenger vehicle loan interest. Taxpayers cannot use that treatment when calculating Hawaii income tax. The law does not state the amount of any tax increase.
Rural Property Loan Interest Loses Tax Treatment
For Hawaii tax purposes, taxpayers cannot use the specified federal rule for interest on loans secured by rural or agricultural real property. The law does not state the tax amount or a direct effect on borrowers.
Nonprofits Pay Hawaii Tax on Business Income
For Hawaii tax years starting after December 31, 2025, specified organizations pay state tax on unrelated business income under Hawaii rules. Income from a legal service plan is excluded. The law does not state the tax amount.
Political Groups and Homeowner Associations Pay Tax
Starting with Hawaii tax years after December 31, 2025, the state applies income taxes to political organizations and qualifying homeowners associations. Hawaii’s tax rules set the rates. The law does not state a rate amount or household tax effect.
Hawaii Changes Roth IRA Tax Rules
For Hawaii tax years starting after December 31, 2025, the state applies Roth IRA rules with one specified exception. For the covered contribution or rollover calculation, Hawaii uses federal adjusted gross income. The law does not state a tax change for an account holder.
Rental Owners Get New Tax Calculation
For Hawaii tax years starting after December 31, 2025, the state uses federal adjusted gross income to calculate the tax offset for rental real estate activity. The rule applies to taxpayers subject to these rental activity rules. The law does not state whether a household’s tax rises or falls.
Small-Business Stock Gets Older Tax Rules
For Hawaii tax years starting after December 31, 2025, the state uses the version of the federal small-business stock gain rules in effect on December 31, 2024. Two specified parts of those rules do not apply in Hawaii. The law does not state the tax effect for an investor.
Electric Utilities Face New Income Timing Rules
For Hawaii tax years starting after December 31, 2025, the state applies the general federal income timing rules but excludes two specified rules for qualified electric utilities. The change affects utility tax calculations. The law does not state a direct effect on household prices or taxes.
Sponsors & Cosponsors
Sponsor
Nadine K. Nakamura
Democratic • House
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
House vote • 5/6/2026
House Floor Vote
Yes: 46 • No: 5
Senate vote • 5/1/2026
The Conference committee recommends that the measure be PASSED, WITH AMENDMENTS....
Yes: 2 • No: 0
House vote • 5/1/2026
The Conference Committee recommends that the measure be Passed, with Amendments....
Yes: 3 • No: 0
Senate vote • 4/14/2026
Senate Floor Vote
Yes: 25 • No: 0
Senate vote • 4/6/2026
The committee(s) on WAM recommend(s) that the measure be PASSED, WITH AMENDMENT...
Yes: 12 • No: 0
House vote • 3/10/2026
House Floor Vote
Yes: 47 • No: 3
House vote • 3/6/2026
House Floor Vote
Yes: 46 • No: 0
House vote • 2/25/2026
The committee on FIN recommend that the measure be PASSED, WITH AMENDMENTS. The ...
Yes: 16 • No: 0
Bill Text
Bill Text
HB2329_CD1
HB2329_HD1
HB2329_SD1
Original
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