Business FAQs

The Department of Taxation has issued new withholding tables and guidance in December 2024. The new tables may be found on page 26 of Booklet A – Employer’s Tax Guide for 2025.

Updates must be in place by January 1, 2025.

• Update Your Withholding Calculations: The most critical change is to ensure you’re using the new withholding tables issued by the Hawai‘i Department of Taxation. These tables are effective as of January 1, 2025, and can be found in the updated Booklet A – Employer’s Tax Guide for 2025. This booklet provides revised formulas and instructions to calculate the correct amount of state income tax to withhold from each employee’s paycheck.
• Review Employee W-4s: While employees don’t have to submit new Form HW-4s (Employee’s Withholding Allowance and Status Certificate) because of this law change, you should be prepared if an employee wishes to adjust their withholding. Make sure your payroll system can accommodate these individual adjustments based on the updated Form HW-4.
• Check Payroll Software Updates: If you use third-party payroll software, contact your provider to confirm they’ve updated their systems to comply with Hawai‘i’s new withholding requirements.

Check with your payroll software provider for updates to comply with Hawai‘i’s new withholding requirements.

Failure to update withholding may result in incorrect deductions, underpayments, and potential penalties for employees and the employer.

No new forms are required because of the tax law changes. However, the Department of Taxation updated some of its existing forms and publications, including Booklet A – Employer’s Tax Guide. This booklet helps employers understand their responsibilities for withholding taxes. It’s a good idea to review the updated booklet on the Department of Taxation website.

No legal requirement exists, but proactive communication is encouraged to reduce any confusion.

You should let your employees know that their take-home pay will increase starting in January 2025 because of the new state income tax cuts. This is because less taxes will be withheld from their paychecks. Let them know that this is part of the state’s plan to help working families. You can also refer them to this website for more information.

You can direct your employees to a couple resources:

• For more information on the tax cut, refer them to this website: TaxCutHawaii.org. We have easy-to-understand explanations and resources to help people understand the tax cut.
• For individual tax guidance refer them to a tax professional.

Yes, the tax changes will likely benefit you even if you’re a small business owner with no employees. Here’s why:

• The standard deduction increase is a significant advantage for many small business owners. It’ll eventually reach $24,000 for those married and filing jointly, $12,000 for single filers. This means you can reduce a large portion of your income from being taxed. It’s like getting a substantial discount before you even calculate your tax bill.
• The tax bracket adjustments also work in your favor. More of your income will be taxed at lower rates, which means more money stays in your pocket.