In 2024, Governor Josh Green and the Hawai‘i Legislature enacted Act 46, which is described as the largest income tax cut in the state's history. The act involves adjustments to the standard deduction amount and income tax brackets from tax year 2024 through 2031.
To implement these changes, the Department of Taxation has updated its withholding tables. Starting January 2025, employees in Hawai‘i should notice a decrease in withheld taxes, resulting in more take-home pay. This adjustment marks the first of several annual updates that will continue until 2031.
The department clarified that W-2 employees do not need to take any action to benefit from this tax cut since employers are expected to withhold less tax from their paychecks. However, it noted that while withholding adjustments reflect a significant portion of the tax cut benefits, they may not match exactly what taxpayers receive when filing their returns.
Employers have been instructed to adjust employee withholdings beginning January 1, 2025. Changes should be noticeable by late January or early February. Employees who do not see an increase in their net pay are advised to contact their employer.
The department provided examples of paycheck changes at different income levels between tax years 2024 and 2025 but emphasized that actual adjustments depend on individual incomes.
Employers are encouraged to consult the updated Booklet A – Employer’s Tax Guide for precise withholding calculations aligned with Act 46's reductions. The guide is available on the department's website or can be requested via email or phone.
For further assistance or inquiries, individuals can contact the Department of Taxation's technical section by phone or email.