Hawaii tips tax calculator: deductible from 2026
Hawaii adopted the tips deduction for 2026 through Act 35 — while deliberately switching off the federal overtime deduction in the same law. Its own tip credit is tiny: $1.25, and only when tips are generous.
What Act 35 changed
Act 35 (H.B. 2329, signed May 26, 2026) moves Hawaii’s conformity date to the Internal Revenue Code as amended on December 31, 2025, for taxable years after 2025. Its list of inoperative sections adds section 225, the overtime deduction, but not section 224, so qualified tips come off Hawaii taxable income from 2026. For 2025 Hawaii still followed the 2024 Code, before section 224 existed. Hawaii’s rates run from 1.40% to 11.00% under HRS § 235-51; a single filer with taxable income between $24,000 and $36,000 is in the 6.80% band.
Hawaii figures
| Cash wage / minimum | $14.75 / $16.00 |
|---|---|
| In force | July 1, 2026 – December 31, 2027 |
| Next change | after December 31, 2027 — not yet published |
| Tipped threshold | Tip credit only if cash wage plus tips is at least $7.00 above the minimum |
| Tips on the 2025 return | tips stay taxable in this state. For 2025 Hawaii followed the IRC as of Dec. 31, 2024 — before IRC § 224 existed. Source: Hawaii State Legislature |
| Tips on the 2026 return | state allows the federal tips amount. Act 35 (signed May 26, 2026) adopts the IRC as of Dec. 31, 2025 for taxable years after 2025 and makes § 225 (overtime) inoperative but not § 224 (tips), so the tips deduction applies in Hawaii from 2026. Source: Hawaii State Legislature |
The $7.00 test for the tip credit
Hawaii’s minimum is $16.00 from January 1, 2026 and $18.00 from January 1, 2028. An employer may deduct a $1.25 tip credit only when the employee’s wages plus tips are at least $7.00 an hour above the minimum — $23.00 an hour today. On a slow shift the full $16.00 is owed.
A Waikiki server on a slow week
$20,000 of tips with $31,000 of other wages give a $20,000 deduction: $2,400 federally and about $1,285 in Hawaii at 6.42%. In a 32-hour week with only $150 of tips, cash plus tips is below $23.00 an hour, so no tip credit is allowed and the employer owes $40 more.
Test a Hawaii week against the $7.00 rule
Where these figures come from
- Hawaii Department of Taxation · Hawaii Department of Labor and Industrial Relations, Wage Standards
- Act 035, SLH 2026 (H.B. 2329), Relating to Conformity to the Internal Revenue Code (2026-05-26)
- HRS § 235-51, Tax imposed on individuals; rates (2024)
- Minimum Wages for Tipped Employees (table by state) (2026-07-01)
- Minimum Wage and Tip Credit (2026)
Federal rules: how the deduction works.
Figures verified against primary sources on