Hawaii Payroll Tax Rates & Requirements: Comprehensive Employer Guide

Hawaii's payroll tax requirements can feel complex at first glance, but understanding the basics is essential for smooth operations. Whether you're managing taxes for a local team or remote workers tied to Hawaii, staying compliant protects your business from penalties and ensures accurate withholdings. Recent changes for 2025 mean employers need to adjust payroll practices to align with updated rates and thresholds.

Employers in Hawaii must comply with specific state tax obligations in addition to federal requirements. The state's progressive tax system and unique unemployment insurance contributions require accurate calculations and timely reporting. These rules apply across all employee types—seasonal, part-time, and full-time—so it's important to stay on top of every detail.

This guide covers Hawaii payroll tax categories, employer withholding responsibilities, and the most recent updates for 2025. Let's get into it.

Hawaii Payroll Tax Overview

Hawaii payroll taxes include state income tax (SIT), unemployment insurance (SUI), and federal tax obligations. SIT is based on Hawaii's progressive income tax brackets, which adjust for filing status and taxable income. SUI contributions fund unemployment benefits and are determined by a rate assigned to each employer. Federal tax responsibilities, including Social Security and Medicare, are calculated separately under IRS guidelines.

Employers paying wages to employees working in Hawaii must withhold state taxes. This requirement extends to wages earned outside Hawaii under two specific conditions: the employee's regular place of work is in Hawaii, or the wages are issued from an office located in the state. Seasonal, part-time, and full-time employees are all subject to withholding obligations, so employers should account for every worker when managing payroll.

Hawaii's 2025 payroll tax updates include changes to income tax brackets and standard deductions. The revised withholding tables in Booklet A reflect these updates, which directly impact payroll calculations. Employers must ensure payroll systems align with the updated withholding amounts to avoid inaccuracies. Employees will also notice more take-home pay due to ongoing state income tax cuts, scheduled to continue annually through 2031.

Hawaii State Income Tax Withholding

Hawaii's state income tax withholding requires precision. Employers calculate withholdings using Hawaii's progressive tax rates, which are structured by income brackets and filing status. The official withholding tables in Booklet A provide detailed guidance for determining exact amounts. Following these tables ensures accurate deductions for every payroll cycle.

Key Hawaii Withholding Forms

Several forms are necessary to meet Hawaii's withholding tax requirements. Each serves a distinct purpose and must be handled according to specific timelines.

• HW-4 (State Equivalent of Form W-4): Employees submit the HW-4 to declare filing status and exemptions. Without this form, employers must withhold taxes as if the employee is single and claiming zero exemptions. This default withholding prevents noncompliance but can lead to higher deductions than needed.

• HW-14 (Quarterly Withholding Return): Employers report withheld taxes each quarter using Form HW-14. Filing deadlines fall on April 15, July 15, October 15, and January 15. Any mistakes in the original filing require an amended return to correct the error. Missing the deadlines results in penalties and interest, so staying on schedule is non-negotiable.

W-2 or HW-2 Filing

Employee wage statements, including federal Form W-2 and Hawaii Form HW-2, must be issued by January 31. Hawaii employers filing on paper need to include Form HW-30 as a transmittal. For electronic submissions, Hawaii Tax Online offers manual entry, Excel uploads, or bulk file upload options.

Hawaii Unemployment Insurance (SUI)

Hawaii's Unemployment Insurance program supports employees who lose their jobs under qualifying circumstances. Employers play a direct role in funding this system through payroll taxes, which are calculated based on specific rates and wage thresholds. Understanding how SUI works ensures compliance and avoids unnecessary penalties.

Rates and Wage Bases

New employers in Hawaii begin with a predetermined SUI contribution rate. This initial rate applies until an experience rating is established, which adjusts based on factors like payroll size and claims history. For 2025, the taxable wage base remains $59,100. Employers are responsible for applying the SUI tax rate to each employee's earnings up to this amount. Any wages exceeding $59,100 are exempt from further SUI contributions.

Tracking employee earnings carefully throughout the year is important to avoid overpaying or underpaying contributions. Payroll systems should be updated to reflect the correct rate and wage base for accuracy in quarterly calculations.

Quarterly Reporting

Employers must submit SUI reports every quarter using specific forms. The UC-B6 form is required for reporting wages, taxable earnings, and contributions owed. This form and any associated payments are due on the following dates:

• First Quarter: April 30

• Second Quarter: July 31

• Third Quarter: October 31

• Fourth Quarter: January 31 of the following year

Reports must be thorough and error-free to ensure proper crediting of contributions. Payments can be made online through Hawaii Tax Online or by mail. Ensuring timely submission avoids complications and keeps the employer's account in good standing with the state.

Penalties for Noncompliance

Late filings or unpaid contributions result in penalties, including daily interest on outstanding balances. Employers may also face audits or other enforcement actions for failing to report accurately. Staying on top of deadlines and ensuring payroll systems are configured correctly helps prevent these issues. Regularly reviewing payroll records and confirming accuracy before filing keeps the process smooth and compliant.

Paying and Filing Schedules

Payroll tax compliance in Hawaii requires employers to follow specific payment and filing schedules based on their tax liability. Each timeline ensures withheld taxes and unemployment contributions are reported and paid accurately. Staying organized prevents penalties and keeps payroll processes running smoothly.

Withholding Payment Frequency

Hawaii determines the frequency of withholding tax payments by the total annual withholding liability of the employer. Here's how the thresholds break down:

• Semi-weekly payments: Employers with over $40,000 in annual withholding tax liability must remit payments within three business days of running payroll.

• Monthly payments: Employers with annual liabilities between $5,000 and $40,000 must make payments by the 15th day of the following month.

• Quarterly payments: For liabilities below $5,000 annually, payments align with quarterly filing deadlines on April 15, July 15, October 15, and January 15.

Employers exceeding the $40,000 threshold are required to use Hawaii Tax Online for e-payments. Others may choose e-payment for convenience but are not obligated to do so.

Quarterly Filing Requirements

All employers must file quarterly returns for both state income tax withholding and unemployment insurance contributions. Each filing must reconcile the payments made during the quarter with the calculated liability.

• HW-14 (Withholding Tax Return): Employers report employee wages, taxable amounts, and withheld taxes. Any discrepancies, such as underpayments, need to be resolved when filing. Overpayments can be credited or refunded by submitting an amended return.

• UC-B6 (Unemployment Insurance Form): This quarterly report calculates SUI contributions based on taxable wages. Employers should apply the correct rate up to the annual wage base to ensure accuracy.

Quarterly returns for both forms are due on the same dates: April 15, July 15, October 15, and January 15 of the following year for the fourth quarter.

Annual Reconciliation

At year-end, employers must confirm that all withheld taxes have been accurately reported and paid. Hawaii no longer requires HW-3 for reconciliation. Instead, employers issue wage statements (W-2 or HW-2) to employees and submit copies to the state by January 31. Submissions can be made electronically through Hawaii Tax Online or on paper with the HW-30 transmittal form.

Employers should review payroll records before the January deadline to ensure all quarterly payments match the reported withholding totals. Accurate reconciliation avoids discrepancies and ensures compliance with state payroll tax requirements.

Hawaii Temporary Disability Insurance (TDI)

Hawaii Temporary Disability Insurance (TDI) ensures employees can receive partial wage replacement if they cannot work due to a non-work-related illness or injury. Private employers across the state are required to provide this coverage, and compliance is non-negotiable. Meeting your obligations involves understanding employee eligibility, funding responsibilities, and integration with other benefits.

Employers' Obligations

Employers must offer TDI coverage to employees who meet specific criteria. Eligibility includes working at least 20 hours per week, earning a minimum of $400 during the past 14 weeks, and being employed for at least 14 weeks. Coverage can be provided through a state-approved private insurance plan or a self-insured plan authorized by the Hawaii Department of Labor and Industrial Relations. Employers also need to ensure timely benefit payments and maintain detailed records for every claim submitted.

Employers may choose to fully fund TDI premiums or share the costs with employees. If sharing costs, deductions must comply with Hawaii's wage withholding rules. Employers must clearly communicate the coverage details to employees and handle all administrative responsibilities to avoid compliance issues.

Maximum Deductions

Hawaii law allows employers to deduct up to 50% of the TDI premium cost directly from employee wages. However, the amount deducted cannot exceed 0.5% of an employee's weekly wages or $6.00 per week, whichever is lower. Any costs beyond employee contributions are the employer's responsibility. Payroll systems must be configured to calculate these deductions accurately to avoid overcharging employees.

Coordination with Other Benefits

TDI benefits may intersect with other workplace benefits, including sick leave and short-term disability insurance. Although Hawaii does not mandate Paid Family and Medical Leave (PFML), employers must ensure that TDI supplements other employer-provided benefits appropriately. TDI also works alongside federal protections like FMLA by offering wage replacement during unpaid leave.

Clear communication with employees about how TDI interacts with other benefits minimizes confusion and ensures compliance. When benefits are coordinated correctly, employees can access the support they need without unnecessary delays or errors.

Penalties and Compliance Tips

Penalties for failing to properly manage Hawaii payroll taxes are unavoidable if deadlines are missed or records are inaccurate. Employers must stay on top of requirements to avoid financial setbacks and legal consequences. Timely action and accurate filing protect your business and keep operations running smoothly.

Late Filing or Payment Penalties

Hawaii enforces penalties for late filings or unpaid taxes related to both withholding and unemployment insurance. These penalties are calculated based on the amount owed and the length of the delay.

For state income tax withholding:

• A 5% penalty per month is applied to unpaid amounts, with a maximum cap of 25%.

• Interest accrues daily at an 8% annual rate until the outstanding balance is fully paid.

For unemployment insurance contributions:

• Penalties include a flat $10 charge or 10% of the unpaid amount, depending on which is greater.

• Interest accrues at 2% per month on overdue contributions.

Consistent late payments or filings can result in audits, additional scrutiny, and potentially larger penalties. Staying ahead of deadlines is a straightforward way to avoid these issues.

Recordkeeping Requirements

Employers are required to retain specific payroll and tax records for five years to meet Hawaii's compliance standards. These records include:

• Employee wage details

• Hours worked

• Tax withholding amounts

• Copies of submitted forms, including HW-4, HW-14, and UC-B6

Audits are often triggered by discrepancies in reported wages, missed payments, or employee complaints. Failing to provide accurate records during an audit can lead to fines or additional penalties. Keeping detailed and organized records ensures that your payroll data is audit-ready and compliant with state regulations.

Personal Liability

Hawaii law holds employers and responsible individuals personally liable if withheld taxes are not remitted. This responsibility extends to officers, directors, and anyone with control over payroll operations.

When taxes are withheld but not paid to the state, the government may pursue legal action. Consequences include liens, wage garnishments, or even criminal charges in cases of intentional nonpayment.

To avoid personal liability:

• Deposit withheld taxes promptly and in full.

• Regularly review payroll accounts to confirm that all payments align with state requirements.

• Use systems or processes that automate tax remittance to minimize errors.

Personal liability is a serious risk for employers and decision-makers involved in payroll. Taking deliberate steps to meet tax obligations protects your business and shields individuals from financial or legal exposure.

Frequently Asked Questions

Hawaii payroll taxes often come with questions about specific requirements and calculations. Below, we've broken down common employer concerns to provide clear and practical answers.

Does Hawaii have state payroll taxes?

Hawaii imposes state income tax, which employers are required to withhold from employee wages. Employers must also manage unemployment insurance contributions and temporary disability insurance when applicable. These state-specific taxes are separate from federal payroll obligations, such as Social Security and Medicare.

How much tax is taken from a paycheck in Hawaii?

The amount withheld from an employee's paycheck depends on Hawaii's progressive tax system, which applies higher rates as taxable income increases. Employers calculate withholding using the employee's HW-4 form, which outlines filing status and claimed exemptions. Other factors, like temporary disability insurance deductions, may also affect the final amount withheld.

How much tax do I pay out of my paycheck?

Employees see different paycheck deductions based on their individual circumstances. Filing status, the number of dependents claimed, and any additional withholdings all play a role. Beyond state income tax, federal taxes like Social Security, Medicare, and federal income tax are also deducted from wages. Employers are responsible for ensuring accurate calculations using updated withholding tables.

What taxes are paid in Hawaii?

Employers handle several payroll tax responsibilities in Hawaii:

• State Income Tax: Deducted from employee wages and remitted quarterly using the HW-14 form.

• Unemployment Insurance (SUI): Paid by employers based on assigned tax rates and the annual taxable wage base.

• Temporary Disability Insurance (TDI): Employers may deduct up to 50% of the TDI premium from employee wages or cover the full cost themselves.

Hawaii does not have local payroll taxes, but federal tax requirements continue to apply.

Resources and Next Steps

Managing Hawaii payroll taxes effectively means knowing where to go for reliable information and having access to the right platforms and forms. Here are the key resources every employer should use to stay compliant and organized.

Official Hawaii Tax Online

Hawaii Tax Online is the state's platform for filing and managing payroll tax accounts. Employers can e-file required forms like HW-14 for withholding taxes or UC-B6 for unemployment insurance. The system also supports electronic payments, which are mandatory for employers with annual withholding liabilities exceeding $40,000.

Employers filing wage statements, such as W-2 or HW-2 forms, can choose between manual entry, Excel uploads, or bulk file submissions. Using Hawaii Tax Online speeds up processing and minimizes calculation errors.

Hawaii Department of Labor and Industrial Relations

The Department of Labor and Industrial Relations provides resources for understanding unemployment insurance and Temporary Disability Insurance requirements. Employers can access detailed instructions for calculating SUI contributions, download forms like UC-B6, and review eligibility criteria for TDI coverage.

For businesses opting to self-insure TDI, the department provides application forms and approval guidelines. Their website is also a helpful source for updates on contribution rates, wage bases, and reporting deadlines.

Hawaii Department of Taxation

The Hawaii Department of Taxation offers everything needed for withholding tax compliance. Employers can locate withholding tax tables, download forms like HW-30 for W-2 transmittals, and request withholding account numbers using Form BB-1.

The department also provides filing instructions for both quarterly returns (HW-14) and year-end wage statements. Amended return forms are available for correcting any previously submitted filings. Staying informed through their resources ensures accurate reporting and payment.

Benefit of Automated Payroll Solutions

Automated payroll systems streamline the process of calculating withholding taxes, applying SUI rates, and generating required forms like HW-14 and UC-B6. These systems also track filing deadlines and send reminders for timely submissions.

For employers managing Hawaii payroll taxes alongside federal obligations, automation saves time, reduces manual errors, and keeps records well-organized. Though not required, payroll automation can simplify compliance and free up time for other priorities.

Navigating Hawaii's payroll tax requirements is a complex but manageable process when you have the right information and tools. By staying informed, meeting deadlines, and keeping accurate records, you can maintain compliance and avoid costly penalties. If you're looking for a simpler way to handle payroll taxes alongside other HR responsibilities, let us show you how GoCo can help.