Bill > SB123

This bill eliminates the home mortgage interest deduction for second homes under Hawaii's income tax law by modifying Section 235-2.4 of the Hawaii Revised Statutes. Specifically, the bill adds two new provisions to the list of Internal Revenue Code sections that will not be operative for state tax purposes: Section 163(h)(4)(A)(i)(II), which defines a qualified residence for home mortgage interest deduction, and Section 163(h)(4)(A)(ii)(II), which addresses home mortgage interest deduction for married individuals filing separately. This means that Hawaii taxpayers will no longer be able to claim a tax deduction for mortgage interest on second homes. The bill requires the department of budget and finance, in consultation with the department of taxation, to submit reports to the legislature about the administration of this act for five consecutive years, from 2026 to 2030. The changes will apply to taxable years beginning after December 31, 2024, giving taxpayers and tax authorities time to prepare for the new rule.

Budget and Finance, Housing and Urban Affairs

https://www.capitol.hawaii.gov/session/measure_indiv.aspx?billtype=SB&billnumber=123&year=2026