Hawaii Payroll Taxes and Withholding Guide (2026)

What Makes Hawaii Payroll Different

Federal payroll tax is the same in every state. What changes from one state to the next is the second layer: state income tax withholding, employer unemployment taxes, any local wage taxes, and any state social-insurance premiums. Hawaii's second layer has three headline features. The income tax is graduated with a high top rate and withheld through an allowance-plus-flat-deduction percentage method, the state is one of the few that deducts an employee Temporary Disability Insurance (TDI) premium, and its withholding tables are unusually old, in force since January 1, 2013.

The income tax is withheld with the Booklet A computer formula: the employer subtracts $1,144 for each Form HW-4 allowance plus a flat $4,350, then applies a single or married rate chart that tops out at 7.9 percent of the wage after allowances. On top of that, most Hawaii workers see a small TDI line (0.5 percent of weekly wages, capped by a weekly dollar maximum), and many also have a Prepaid Health Care deduction toward their employer health plan. There is no local wage tax anywhere in Hawaii and no employee unemployment contribution. The federal baseline behind all of this is explained in the how payroll taxes work guide.

Employee Withholding Overview in Hawaii

A Hawaii employee sees federal taxes, a graduated state income tax, and a TDI disability premium. There is no employee unemployment line and no local wage line.

The federal lines work identically to any other state. For Social Security, the 2026 wage base is $184,500, after which Social Security stops for the year. Medicare has no cap. What is distinctive in Hawaii is the graduated state income tax reduced by a per-allowance amount plus a flat $4,350, the employee TDI premium, and the Prepaid Health Care deduction. There is no local wage tax and no employee unemployment contribution.

How Is Hawaii State Income Tax Withheld?

Hawaii uses the annualized percentage method in the Department of Taxation's Booklet A, Employer's Tax Guide. The employer annualizes wages, multiplies the number of Form HW-4 allowances by $1,144 and subtracts that, subtracts a flat $4,350, then applies the graduated rate chart for the employee's single or married status and divides across pay periods. The single-status chart below applies to the annual wage after allowances. Unmarried head of household uses the single chart.

Married employees use a wider chart on the same annual wage after allowances (1.40% over $0, rising through 3.20%, 5.50%, 6.40%, 6.80%, and 7.20% to a 7.60% band over $96,000 and 7.90% over $250,000). These schedules have been in effect since January 1, 2013 and are the same for 2025 and 2026; the Hawaii paycheck calculator is labeled 2025 and reproduces them. Your final Hawaii income tax is settled on Form N-11, where the 2024 tax-cut law's wider brackets and larger standard deduction apply. The federal Form W-4 sets federal withholding, covered in the W-4 withholding explained guide, while Form HW-4 sets the Hawaii status and allowances.

The $1,144 Allowance Method (Form HW-4)

Rather than a percentage-of-wages deduction, Hawaii subtracts a flat dollar amount for each allowance the employee claims on Form HW-4, plus a separate flat $4,350 that everyone receives, then taxes what remains. Form HW-4, the Employee's Withholding Allowance and Status Certificate, is Hawaii's version of the federal W-4; allowances are based on your personal exemptions and estimated deductions.

A single employee earning $65,000 with one allowance is taxed on $59,506 ($65,000 minus $1,144 minus $4,350). Because each Hawaii allowance is only $1,144, its dollar value is modest, about $87 a year at the 7.6% band, so the flat $4,350 deduction does more of the work than the allowance count. The most common Hawaii mistake is not filing an HW-4 at all: an employee is then defaulted to single with zero allowances and over-withheld. The Hawaii paycheck calculator shows the allowance and flat deduction amounts used at your income.

Hawaii Temporary Disability Insurance (TDI)

Hawaii is one of only a handful of states that deducts a disability-insurance premium from employee pay. Under the TDI law, most employers must provide disability coverage and may pass up to one-half of the premium cost to the employee, but no more than 0.5 percent of the employee's weekly wages and no more than a maximum weekly deduction that the Disability Compensation Division sets each year.

So an employee earning more than about $1,442 a week in 2025 hits the $7.21 weekly cap; lower earners pay a true 0.5 percent. Some employers choose to pay the entire TDI premium and withhold nothing, which is why two neighbors at similar pay can show different TDI lines. TDI is a disability premium, not an income tax, and it is separate from the Prepaid Health Care deduction. The Hawaii paycheck calculator models the 0.5 percent TDI line and its weekly cap, and lets you switch it off if your employer pays the full premium.

Hawaii Has No Income Tax Reciprocity

Hawaii has no reciprocal income tax agreements with any state. Reciprocity, where a resident of one state who works in another pays income tax only to the home state, does not exist for Hawaii. As an island state with no bordering states, daily cross-border commuting is not a practical issue, so the question arises mainly for remote workers, seasonal workers, and people who move mid-year.

A nonresident who performs work in Hawaii generally has Hawaii income tax withheld on the Hawaii-source wages and files a Hawaii nonresident return (Form N-15), then claims a credit for the tax paid to Hawaii on their home-state return so the same income is not taxed twice. A worker who moves to or from Hawaii during the year is a part-year resident and apportions income between Hawaii and the other state. There is no reciprocity form that stops Hawaii withholding.

Employer Payroll Obligations in Hawaii

Hawaii employers carry the federal employer taxes plus State Unemployment Insurance through the Department of Labor and Industrial Relations, and must provide TDI coverage and a qualifying health plan under the Prepaid Health Care Act. The federal side, covered in the employer payroll tax obligations guide, includes the matching 6.2% Social Security and 1.45% Medicare plus Federal Unemployment Tax (FUTA).

The Hawaii unemployment taxable wage base is $64,500 per employee for 2026, up from $62,000 in 2025. New employers pay 2.4% under the 2026 Schedule C before moving to an experience-rated rate (0% to 5.6%); these are employer costs and are never deducted from employee pay. Employers also carry at least half of the TDI premium and the larger share of the Prepaid Health Care premium. Model the combined cost-to-hire with the employer payroll tax calculator.

The Prepaid Health Care Act

Hawaii is the only state with a mandatory employer health-insurance law. Under the Prepaid Health Care Act, an employer must provide a qualifying medical plan to any employee who works 20 or more hours a week and earns at least 86.67 times the state minimum wage in a month. The employer pays the larger share of the premium, and may withhold the employee's share, but that share is capped at 1.5 percent of the employee's monthly wages.

So a Hawaii pay stub often shows a health-plan deduction that is legally capped at 1.5 percent of wages, separate from the TDI premium. The exact dollar figure depends on the chosen plan, so this guide and the calculator describe the cap rather than modeling a specific premium. Because a traditional pre-tax Section 125 health deduction lowers federal and Hawaii taxable wages, the Prepaid Health Care deduction can also reduce the income tax base, which is covered in the understanding payroll deductions guide.

Hawaii Supplemental Wage Withholding

Supplemental wages are payments outside regular salary: bonuses, commissions, overtime, severance, and sales awards. Hawaii does not publish a separate flat supplemental withholding rate, so employers generally use the aggregate method.

• Aggregate method: the supplemental payment is added to the most recent regular wage payment and the combined amount is run through the regular Booklet A withholding tables; the tax already withheld on the regular wages is then subtracted.
• No flat state supplemental rate: unlike some states, Hawaii's Booklet A does not set a separate flat percentage for bonuses, so the graduated schedule applies.
• FICA and TDI still apply: Social Security, Medicare, and the TDI premium continue under their own rules on supplemental pay.
• Local wage tax and employee unemployment: none, on supplemental wages or regular wages.

Federal income tax withholding on supplemental wages is a separate calculation set by the IRS, commonly a flat 22 percent on separately paid bonuses. For the federal supplemental math, use the Bonus Tax Calculator.

Hawaii Filing and Payment Frequency

Hawaii employers deposit withheld state income tax and file periodic withholding returns (Form HW-14) on a schedule based on the amount withheld, through the Department of Taxation, and reconcile annually on Form HW-30. Employers whose withholding liability exceeds $40,000 a year must file and pay electronically through Hawaii Tax Online. Booklet A sets out the deposit schedule and the withholding tables. The federal deposit schedule is covered separately in the payroll tax deadlines guide.

Unemployment tax is reported and paid quarterly through the Department of Labor and Industrial Relations, and TDI and Prepaid Health Care coverage are maintained with the Disability Compensation Division. New employees must be reported to the Hawaii new-hire reporting system within 20 days of the hire date.

How Take-Home Pay Works in Hawaii

The calculation sequence runs from gross pay down to net pay. Because Hawaii income tax begins with federal wages, the same pre-tax deductions that reduce federal wages also reduce the Hawaii state base.

1. Start with gross wages for the pay period.
2. Subtract federal pre-tax deductions (401(k), Section 125 health premiums) to find taxable wages for federal and Hawaii state tax.
3. Apply federal income tax withholding using the Form W-4 and IRS Publication 15-T.
4. Annualize wages, subtract $1,144 per HW-4 allowance and a flat $4,350, apply the graduated single or married chart, and divide across pay periods.
5. Subtract Social Security (6.2%), Medicare (1.45%), and the TDI premium (0.5% of weekly wages, capped). The remainder is net pay; there is no employee unemployment line and no local wage line.

To see exact figures for a specific salary, HW-4 status, and pay frequency, use the Hawaii paycheck calculator or the general take-home pay calculator for a full pre-tax benefits stack.

Hawaii Payroll Quick Facts (2026)

Frequently Asked Questions