Hawaii Income Tax Rates & Brackets (Tax Year 2025 — Filed in 2026)

Remote Workers and Multi-State Taxation

Living in Hawaii, Working for an Out-of-State Employer

As a Hawaii resident, you owe Hawaii income tax on all income, regardless of where your employer is located. This is a fundamental principle of Hawaii residency taxation.

What this means:

• Your employer’s location does not determine your Hawaii tax obligation
• Income from mainland employers — California, New York, Texas, or any other state — is fully taxable in Hawaii
• Hawaii requires proper Hawaii tax withholding for resident employees, using Form HW-4

Example: A Hawaii resident working remotely for a New York employer owes Hawaii income tax on 100% of that income.

Source: https://files.hawaii.gov/tax/legal/har/har_235.pdf (HAR §18-235-4-02)

Working in Hawaii, Living in Another State

Non-residents who perform work physically in Hawaii owe Hawaii income tax on income earned from Hawaii sources.

Physical Presence Rule: Income is sourced to Hawaii based on where the work is physically performed. If a nonresident employee spends part of the year working in Hawaii, only wages earned during Hawaiian work days are taxable in Hawaii.

Withholding threshold: Hawaii has a day-based withholding threshold — employers generally need not withhold Hawaii income tax for nonresident employees who work in Hawaii for only a small number of days. Once the threshold is exceeded, withholding is required for all Hawaii workdays.

Source: https://tax.hawaii.gov/geninfo/a2_b2_4empl_whhold_employee/ and Tax Foundation analysis of Hawaii nonresident rules

⚠️ Interstate Tax Risk Indicator

Remote workers with connections to Hawaii face particular complexity because of Hawaii’s physical isolation — most income-earning activities involving Hawaii residents and mainland employers create multi-state filing obligations.

States requiring special attention for Hawaii-connected remote workers:

• California — Aggressive residency audits for individuals with California business ties; California-source income rules are strict
• New York — Applies the “convenience of the employer” rule (see below), potentially taxing remote work days for NY-based employers
• Pennsylvania — 200+ local income tax jurisdictions create complexity for PA-employed Hawaii residents
• Connecticut — Applies a modified “convenience of the employer” rule; complex credit system for taxes paid to other states
• Massachusetts — Telecommuter rule historically applied to remote workers for MA employers

Source: https://tax.hawaii.gov/geninfo/ and IRS Publication 505 (https://www.irs.gov/publications/p505)

“Convenience of the Employer” Rule

Hawaii does NOT apply the “convenience of the employer” rule.

Hawaii sources nonresident income based on where the work is physically performed. A nonresident working remotely from Hawaii for a Hawaii employer is not automatically subject to Hawaii income tax on all income — only income from work physically performed in Hawaii is sourced to Hawaii for nonresident purposes.

However, Hawaii residents are taxed on all income regardless of employer location — this is not a “convenience rule” but rather the standard residency-based worldwide income taxation.

Important distinction: If you are a Hawaii resident working remotely for any employer anywhere, Hawaii taxes 100% of your wages. If you are a non-resident working remotely from outside Hawaii for a Hawaii employer, only days worked physically in Hawaii are Hawaii-sourced.

Source: https://files.hawaii.gov/tax/legal/har/har_235.pdf and https://files.hawaii.gov/tax/legal/taxfacts/tf97-4.pdf

Reciprocal Agreements

Hawaii has no reciprocal tax agreements with any other state.

Hawaii’s geographic isolation as a Pacific island state makes reciprocal agreements with any mainland state uncommon. As of Tax Year 2025, no reciprocal agreements exist between Hawaii and any other U.S. state.

What this means for Hawaii residents working in other states:

• You must file a nonresident return in the state where you physically worked
• You file a resident return in Hawaii reporting all income
• You may claim a credit on your Hawaii return (Schedule CR) for income taxes paid to other states on the same income

What this means for non-Hawaii residents working in Hawaii:

• You must file a Hawaii nonresident return (Form N-15) for Hawaii-source wages
• Your home state may allow a credit for taxes paid to Hawaii

Source: https://tax.hawaii.gov (no reciprocity page — confirms absence of agreements)

Multi-State Tax Filing for Hawaii Residents

When earning income in multiple states:

1. File a Hawaii resident return (Form N-11) reporting all income from all sources
2. File nonresident returns in other states where income was earned from sources in those states
3. Claim a credit on your Hawaii return for state income taxes paid to other states

Forms required:

• Schedule CR — Credit for Taxes Paid to Another State or Foreign Country (attached to Form N-11)
• Form N-15 (if you are a part-year resident — separate issue from claiming a credit)

Limitations:

• The credit for taxes paid to another state may not exceed the Hawaii tax otherwise due on that income
• No credit is allowed for city or local income taxes paid to another state
• The other state’s tax must be an income-based tax imposed on both residents and nonresidents

Source: https://tax.hawaii.gov/geninfo/ (Schedule CR instructions) and https://files.hawaii.gov/tax/legal/taxfacts/tf97-4.pdf