Hawaii Tax Cuts Ahead: New Withholding Tables Unveiled by Tax Dept!

Exciting news for taxpayers in Hawai‘i! The income tax withholding tables have received a major facelift thanks to a recent state law that promises to lighten your tax burden. Buckle up, because starting in tax year 2024 and continuing through 2031, you’ll notice some significant changes that will put more money in your pocket!

Signed into law by Gov. Josh Green, this groundbreaking legislation, known as Act 46, is celebrated as “the largest income tax cut in the state’s history.” It’s a game changer, and here’s what you need to know.

Beginning January 2025, employees will see a noticeable drop in taxes withheld from their paychecks. That means more take-home pay for you—right when you need it! This is just the first of several annual updates to your withholding tables, happening every January through 2031.

Key Highlights of the New Law:

• When does it start? The changes kick in for tax year 2024.
• Gradual Improvements: Your standard deduction will gradually increase in 2024, 2026, 2028, 2030, and 2031. Plus, the income tax brackets will also be adjusted in 2025, 2027, and 2029. Get ready to hold onto more of your hard-earned cash!
• Annual Withholding Adjustments: From January 2025 through 2031, expect annual tweaks to the withholding tables. Each year, you can look forward to seeing that paycheck grow just a little bit more.

Your Questions Answered

What do I need to do to benefit from this tax cut?

Good news! If you’re a W-2 employee, you don’t have to lift a finger. The Department of Taxation is taking care of the adjustments, meaning your employer will automatically withhold less from your paycheck.

Will the withholding adjustment reflect my actual tax cut?

Not exactly. While the withholding change will give you a taste of the tax cut benefits, the actual tax savings will depend on your personal situation. Think of it as a sneak preview! Many taxpayers can also expect a bigger refund down the line. And if you want to tweak your withholding allowances, that option is open to you.

When can I expect to see a bump in my paycheck?

Mark your calendars! Employers have been instructed to adjust the withholding amounts starting January 1, 2025. So, keep an eye out for changes in late January or early February. If your paycheck doesn’t reflect an increase, be sure to reach out to your employer.

How much more can I expect in my paycheck?

The exact change in your paycheck will depend on your income level. The Department of Taxation will provide specific examples to help you understand what to expect between tax years 2024 and 2025.

Additionally, employers can access the updated Booklet A – Employer’s Tax Guide for 2025. This guide will include new formulas and withholding tables to ensure that they are accurately calculating your take-home pay in accordance with the new tax reductions.

To check out the updated Booklet A, visit the Department of Taxation’s website. If you have questions or want to request a copy by email or mail, don’t hesitate to reach out to their technical section at 808-586-1530 or via email. You can also visit them in person at the Department of Taxation, Taxpayer Services, 1st floor, 830 Punchbowl St., Honolulu 96813-5094.