Bill > HB520

This bill proposes to exclude tips from state income taxes in Hawaii, specifically targeting tips received by employees in occupations where they earn more than $30 per month in gratuities. Under this legislation, tips that are reported to employers for federal tax purposes (as defined in Title 26 of the United States Code section 3102) would be exempt from gross income, adjusted gross income, and taxable income calculations. The bill defines "tips" as voluntary monetary contributions received from guests, patrons, or customers, and a "tipped employee" as someone working in an occupation earning more than $30 monthly in gratuities. The state's Director of Taxation would be responsible for preparing necessary forms, potentially requiring evidence from taxpayers, and adopting rules to implement this tax exclusion. The legislature's rationale for the bill is to support local small businesses in attracting qualified employees, noting a growing movement at the federal level to similarly treat tip income. The tax exclusion would take effect for taxable years beginning after December 31, 2025, giving businesses and tax authorities time to prepare for the change.

Labor and Employment

https://www.capitol.hawaii.gov/session/measure_indiv.aspx?billtype=HB&billnumber=520&year=2026