Budget & Taxes (Income Tax)

Provides a temporary income tax credit for the cost of upgrading or converting a cesspool to a septic system or an aerobic treatment unit system or connecting to a sewer system. Permits the Department of Health, as a pilot program, to certify no more than two residential large capacity cesspools. Applies to taxable years after 12/31/2027. Sunsets 12/31/2032.

Restructures the conveyance tax to a marginal rate system for the sale of properties with residential use, adjusts the tax for multifamily properties to reflect value on a per-unit basis, and applies a cost-of-living adjustment to conveyance tax rates. Allocates revenues from conveyance tax collections. Allocates a portion of conveyance tax collections to the Dwelling Unit Revolving Fund to fund infrastructure programs in county-designated transit-oriented development areas that meet minimum standards of transit-supportive density. Allocates a portion of conveyance tax revenues to the Hawaiian Home Lands Trust Fund.

Establishes a state income tax deduction for contributions made to Hawaii 529 accounts through the college savings program and accounts made through the Hawaii ABLE Savings Program. Conforms to the amendments of the Internal Revenue Code that authorize 529 benefits to be used for K-12 educational expenses. Effective 7/1/3000. (HD1)

Establishes a nonrefundable income tax credit for certain agricultural investment costs incurred for agricultural activities conducted on Hawaiian home lands. Applies to costs incurred after 12/31/2026. Effective 7/1/3000. (SD1)

Amends the Motion Picture, Digital Media, and Film Production Income Tax Credit (film tax credit) by providing additional credits to qualified productions that have a workforce of at least eighty per cent local hires in the first taxable year or second consecutive taxable year and meet other specific requirements, then increasing the local workforce threshold to eighty-two per cent in the third or fourth consecutive taxable year and eighty-five per cent in the fifth consecutive taxable year, that the additional credit is claimed; requiring independent third-party certification of qualified production costs for all film productions claiming the film tax credit; authorizing DBEDT to waive the credit cap per qualified production for one qualified production each fiscal year; and requiring the Hawaii Film Office to submit an annual report to the Legislature. Sunsets 1/1/2033. Effective 7/1/3050. (SD1)

Requires counties to waive permitting fees for certain film activity. Exempts entertainment payroll companies from the GET. Repeals an income tax exemption for persons engaged in the business of motion picture and television film production for taxable years beginning after 12/31/2023. Amends the Motion Picture, Digital Media, and Film Production Income Tax Credit by providing an additional credit to qualified productions with a workforce of at least eighty percent local hires; requiring productions to contact all local labor unions servicing Hawaii's film industry to qualify for the credit; requiring qualified production costs of a taxpayer that exceed $1,000,000 to be certified by a CPA, rather than via tax opinion; increasing the aggregate cap amount on credits allowed in any given year, ramped down by one-sixth over five years beginning on 1/1/2028; and including broadcast and streaming platform productions under the credit. Applies the GET rate for manufacturers to productions. Exempts from the GET amounts received by a motion picture project employer from a client equal to amounts that are disbursed by the motion picture project employer for employee wages, salaries, payroll taxes, insurance premiums, and employment benefits and payments to loan-out companies. Repeals certain tax exemptions and the Motion Picture, Digital Media, and Film Production Income Tax Credit on 1/1/2033. Appropriates funds. Effective 7/1/3000. (HD2)

HB 355 creates a nonrefundable individual income tax credit for homeowners who pay expenses to retrofit their residences with wind-resistant devices, such as storm shutters or reinforced roofs. The credit directly benefits homeowners who make these safety upgrades, reducing the amount of income tax they owe based on their actual retrofit costs. This policy change provides a financial incentive for property improvements designed to enhance resilience against wind damage, without offering cash refunds if the credit exceeds tax liability. The bill remains pending in the 2026 legislative session.

SB 2468 would impose an additional tax (a surcharge) on individuals with taxable income exceeding $1,000,000. The revenue generated would fund the State Medicaid Program, but only if the Legislature approves the surcharge. This bill directly affects high-income earners by increasing their tax obligation. The measure is currently in early committee review stages and requires legislative approval to become law.

Imposes the manufacturing general excise tax rate on motion picture, digital media, and film productions and repeals the provision in the definition of "qualified production costs" that applied the term to mean costs incurred that are subject to the highest general excise tax rate. Exempts from the general excise tax certain amounts received by a motion picture project employer from a client company equal to amounts that are disbursed by the motion picture project employer for employee wages, salaries, payroll taxes, insurance premiums, and employment benefits and payments to loan-out companies. Requires persons making payment to a loan-out company and claiming the Motion Picture, Digital Media, and Film Production Income Tax Credit to deduct and withhold an amount exceeding the amount actually due for all payments made to the loan-out company for services performed in the State. Applies to taxable years beginning after 12/31/2026. Effective 7/1/3050. (SD1)

SB 2451 eliminates the home mortgage interest deduction for second homes under Hawaii's income tax law. This change directly affects Hawaii taxpayers who own second homes and currently claim this tax break on their mortgage interest. The bill removes this specific deduction from the state tax code, meaning owners of secondary properties will no longer receive a tax benefit for mortgage interest paid on those homes. It also requires the state to submit regular reports to the Legislature about the bill's implementation and effects.