General FAQs

There are three key elements of the law that will result in tax savings:

1. Larger Standard Deductions – The Standard Deduction doubles for taxpayers when they file their 2024 tax return this year. The Standard Deduction will increase even more through 2031. This means less of your income is subject to taxation.
2. Wider Tax Brackets – A greater portion of a taxpayer’s income will be taxed at lower rates, which benefits all income groups but has a greater proportional impact for low- and middle-income households. Decreasing rates and eliminating income tax altogether for the lowest bracket continues through 2031.
3. Enhanced Tax Credits – Tax credits like the Earned Income Tax Credit (EITC) and the Food Excise Credit are specifically targeted to help working families with low to moderate incomes.

The new tax cuts make the system more progressive than the old model, reducing the tax burden for those who need it most.

This will depend on your overall financial situation. To learn more, you can use our tax savings calculator.  Households with an $80,000 annual income will save approximately $20,000 in state taxes through 2031.

In 2023, the Governor and Legislature passed Act 163 providing $104 million of income support for working families, particular low-income households. Those actions:

1. Increased Refundable Earned Income Tax Credit from 20% of Federal to 40% The bill doubled the size of the earned income tax credit, providing $50 million of additional support.
2. Doubled the Food Excise Tax Credit and increased income limitation by $10,000. This benefits an additional 90,000 people in our state. The expansion of the credit represents $43 million in direct income support for the people who need it the most.
3. Increased the Child and Dependent Care Tax Credit. It more than doubled the amount of allowable expenses to $5,000 for single filers, $10,000 for joint. It provides a refundable credit of up to $3,000 for working parents struggling to pay the high cost of childcare.

While everyone benefits from Act 46, here’s how it specifically helps low-income individuals and families:

Act 163’s Boost: In 2023, Hawai‘i already took big steps to help those with lower incomes. Act 163 greatly expanded refundable tax credits, especially the Earned Income Tax Credit (EITC) and the Food/Excise Tax Credit. These credits are like direct cash assistance, boosting your income even if you don’t owe taxes. This means bigger refunds for many.

Act 46 Works Differently: The 2024 tax cut is less about direct cash and more about lowering how much tax you pay in general.

Standard Deduction Doubled: This means a larger chunk of your income is tax-free right away. Think of it like this: if you made $25,000 last year, a portion or your pay was taxed. Now, even less of it will be taxed.

Tax Bracket Changes: Act 46 changes the tax brackets, so everybody will be paying a lower effective tax rate. This is especially true for families that make $150,000 or less. It’s like automatically getting a bigger paycheck.

Combined Effect: While it’s true the most dramatic change for low-income folks happened with the earlier tax credits, Act 46 adds to that. The standard deduction change is particularly helpful for those who didn’t owe much tax before.

Important Note: Even if your income is very low, it’s always worth checking if you qualify for refundable credits. You might be leaving money on the table!

Overall, the goal is to make life more affordable, whether you’re just getting by or are considered middle-income. These tax changes work together to help put more money back in the pockets of Hawai‘i’s residents.

Middle-income families will see the biggest benefit from the tax cut. They will pay less in taxes because more of their income will be tax-free, and the tax rates will be lower. This means middle-income families will have more money in their paychecks and bigger tax refunds.

Families with children benefit in several ways:

• The Standard Deduction Advantage: Act 46 increases the standard deduction significantly, meaning families can reduce the amount of their income that’s subject to tax. For married couples filing jointly, this deduction will eventually reach $24,000. Think of it like a big discount before taxes are calculated! This is especially helpful for families with kids, as they often have more expenses.
• Tax Bracket Relief: The law also adjusts the tax brackets, meaning more of a family’s income will be taxed at lower rates. This is like getting a better price on more of the items you buy. While the standard deduction reduces the amount of income that’s taxed, those tax brackets still determine the rates you’ll pay on what’s left.
• Targeted Help Through Credits: Don’t forget about those valuable tax credits designed specifically for families. Act 163, passed in 2023, made the Earned Income Tax Credit and the Child and Dependent Care Tax Credit much more generous. These credits can mean bigger tax refunds for qualifying families, putting more money directly back in their pockets.

The Bottom Line: The new tax laws work together to make life more affordable for families. The standard deduction and tax bracket changes reduce how much tax you owe overall, while those tax credits provide additional targeted support.