Bill > HB1729

This bill, relating to taxation, aims to address Hawaii's housing affordability crisis by disallowing the deduction for home mortgage interest on second homes under state income tax law, effective July 1, 3000, and applying to taxable years after December 31, 2025. The legislature finds that tax breaks for second homes, which are not the taxpayer's primary residence, can increase demand and worsen housing availability. By removing this deduction, which is based on Section 163 of the federal Internal Revenue Code (IRC) but with specific exclusions for Hawaii, the state intends to align its tax policies with its housing goals, reduce a non-essential tax expenditure, and potentially redirect resources to housing production and infrastructure. The bill specifically amends Section 235-2.4 of the Hawaii Revised Statutes to exclude certain provisions of IRC Section 163, including the definition of a qualified residence for the home mortgage interest deduction and the treatment of such deductions for married individuals filing separately, thereby preventing the deduction for interest paid on mortgages for second homes.

Budget and Finance, Housing and Urban Affairs

https://www.capitol.hawaii.gov/session/measure_indiv.aspx?billtype=HB&billnumber=1729&year=2026