What Is the Hawaii Standard Deduction for 2023?

The Hawaii standard deduction is a fixed-dollar amount that taxpayers can subtract from their adjusted gross income (AGI), which reduces the income subject to state tax. For many individuals, using the standard deduction is a straightforward way to lower their tax obligation without the need to track and document specific expenses. The purpose of the standard deduction is to establish a baseline of income that is not taxed, accounting for basic living expenses. This approach is built into the state’s tax forms, offering an accessible option for filers.

Hawaii Standard Deduction Amounts

Recent legislation has increased Hawaii’s standard deduction amounts. For the 2024 tax year, the amounts are $4,400 for Single or Married Filing Separately filers, $8,800 for those Married Filing Jointly or a Qualifying Widow(er), and $6,424 for a Head of Household.

These amounts are distinct from the federal standard deductions. For the same 2024 tax year, the federal standard deduction for a Single or Married Filing Separately filer was $14,600. Married couples filing jointly could claim $29,200, and Heads of Household had a federal standard deduction of $21,900. Taxpayers must use the correct Hawaii-specific figures on their state return and the separate federal amounts on their U.S. Form 1040.

Deciding Between Standard and Itemized Deductions

Taxpayers in Hawaii face a choice between taking the standard deduction or itemizing deductions. Itemizing involves tallying up specific, allowable expenses to calculate a total deduction amount. The more advantageous option is the one that results in a larger total deduction, which lowers state taxable income. A feature of Hawaii’s tax law is that a taxpayer can choose to itemize on their state return even if they took the standard deduction on their federal return. This flexibility is beneficial because Hawaii’s standard deduction is significantly lower than the federal one.

To make an informed decision, one must calculate their potential itemized deductions. Common deductible expenses in Hawaii include:

• Medical and dental costs that exceed 7.5% of federal adjusted gross income.
• State and local taxes, such as state income or property taxes. However, this deduction is not allowed for taxpayers with a federal AGI over certain thresholds: $100,000 for Single filers, $150,000 for Head of Household, and $200,000 for those Married Filing Jointly.
• Interest paid on a home mortgage, which is a substantial deduction for homeowners.
• Charitable contributions made to qualified organizations.

Hawaii also permits certain deductions that are no longer available at the federal level, such as tax preparation fees and certain investment-related expenses. Conversely, some federal deductions, such as for student loan interest, are not allowed on the Hawaii state return. After summing up all eligible itemized deductions, the total should be compared to the standard deduction amount for the filer’s status. If the itemized total is greater, itemizing will result in a lower tax liability.

Taxpayers Ineligible for the Standard Deduction

While most taxpayers can select the standard deduction, specific rules require certain individuals to itemize. The most common situation involves married couples who choose to file separate returns. If one spouse decides to itemize deductions on their Hawaii tax return, the other spouse is not permitted to claim the standard deduction and must also itemize. This rule ensures a couple cannot benefit from one spouse itemizing large expenses while the other also takes the full standard deduction. Additionally, nonresident aliens and dual-status aliens are required to itemize their deductions.

Claiming the Deduction on Your Tax Return

Once a taxpayer determines that taking the standard deduction is the best course of action, the process is direct. The deduction is entered on the Hawaii Resident Income Tax Return, Form N-11, after determining Hawaii Adjusted Gross Income. If not itemizing, the taxpayer enters the appropriate standard deduction amount for their filing status in the designated section of the tax form. For part-year residents and nonresidents filing Form N-15, the process is similar, with the standard deduction being prorated based on the ratio of Hawaii AGI to total AGI.