Recently enacted legislation reinstates three higher tax rate brackets on high-income taxpayers that expired as of December 31, 2015. (HB 209, Act 107.)

Effective for tax years after December 31, 2017, the following brackets again apply to high-income taxpayers.

Joint filers:

— 9.0% on taxable income over $300,000, but not over $350,000;
— 10.0% on taxable income over $350,000, but not over $400,000; and
— 11.0% on taxable income over $400,000.

Head of household filers:

— 9.0% on taxable income over $225,000, but not over $262,500;
— 10.0% on taxable income over $262,500, but not over $300,000; and
— 11.0% on taxable income over $300,000.

Single and married filing separate filers:

— 9.0% on taxable income over $150,000, but not over $175,000;
— 10.0% on taxable income over $175,000, but not over $200,000; and
— 11.0% on taxable income over $200,000.

The legislation also establishes a state nonrefundable earned income tax credit (EITC) equal to 20% of the federal EITC allowed. (Announcement 2017-08, Hawaii Department of Taxation.)

State tax department does not plan to issue revised withholding tables for 2018

According to a representative of the Hawaii Department of Taxation, the Department does not plan to issue revised withholding tables for calendar year 2018 to reflect the changes under Act 107, although the highest withholding tax rate on the current tables is 7.9%. (Booklet A, employer's tax guide, last revised in 2012.)

The representative also informed EY that the deadline for filing calendar year 2017 Forms W-2 with the Department will remain at February 28, 2018, not matching the federal deadline of January 31, 2018. (Email response to inquiry, director's office, technical section.)

As a result of the income tax rate increase, higher paid employees may want to adjust their withholding using state Form HW-4 to account for the higher tax that will be due beginning next year.

Supplemental income tax withholding

Hawaii does not provide for a supplemental rate of income tax withholding.

Other 2017 legislation changes withholding tax return frequency

As we reported previously, effective January 1, 2018, all Hawaii employers will file withholding tax returns quarterly, rather than monthly. The legislation (SB 1007) does not change the frequency of withholding tax payments.

Currently, employers are required to file withholding tax returns on a monthly basis. Only those employers paying withholding taxes of $5,000 or less on an annual basis are currently permitted to file quarterly.

The legislation does not change the payment frequency of withholding taxes. Employers with an annual tax liability of $5,000 or less will continue to remit taxes on a quarterly basis; employers with an annual tax liability of more than $5,000 but not more than $40,000, monthly; and employers with an annual tax liability exceeding $40,000, semi-weekly.

For more information on Hawaii withholding tax, see the Department's website.

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