State playbook - Hawaii

Matchbook, tuned for Hawaii's Prepaid Health Care Act, progressive tax stack, and Pacific disaster cycle.

Hawaii layers a 1.40%-11.00% progressive income tax on top of FICA, one of the highest SUI wage bases in the country ($64,500 in 2026), mandatory Temporary Disability Insurance, and the nation's only employer mandate for health coverage at 20 hours a week. The Prepaid Health Care Act changes the Section 125 math, the affordability math, and the waive-coverage math that broker ROI decks import from mainland defaults.

What Matchbook ships for Hawaii Tax profile
Tax mechanics

Payroll tax in Hawaii

State income tax

Applies

Hawaii's progressive income tax runs from 1.40% to 11.00% across 12 brackets. Under Act 46, SLH 2024 (Green Affordability Plan II), the 11% top rate now applies to single income above $325,000 and MFJ above $650,000 for 2025, with additional bracket widening phased in through 2031. A $3,300 healthcare FSA election for a 22% federal, 7.9% state bracket Hawaii employee saves about $1,370 versus about $1,050 for a no-state-tax Florida peer. Matchbook recomputes under-election guardrails for the deeper Hawaii savings-per-dollar and flags phased bracket shifts in the 2027 and 2029 projections.

Hawaii Unemployment Insurance

Wage base $64,500 (2026); $62,000 (2025)

Rate range: 2.40%-5.60% on Schedule C for 2026; new employer rate 4.00% (3.00% construction); maximum annual tax about $3,612 per employee

Hawaii's UI wage base is one of the highest in the nation, so Section 125 salary reductions generate meaningful employer UI savings per employee across the entire first $64,500 of wages - unlike Florida's $7,000 base. Matchbook surfaces the full employer UI savings line in the Hawaii ROI report and stacks it with the 7.65% FICA match, the 0.5% TDI offset, and the PHCA premium share on every pre-tax dollar.

Employer FICA

7.65% / 1.45% split

Employer FICA is 7.65% on wages up to the Social Security wage base ($176,100 in 2025; projected about $183,600 in 2026) and 1.45% above it. Hawaii also requires Temporary Disability Insurance (TDI): employers may withhold up to 0.5% of weekly wages, capped at $7.21 per week in 2025, with the balance of premium paid by the employer. Matchbook models FICA, UI, and TDI per employee and includes the employer-paid PHCA premium share as a coverage-dependent line.

Employer credits and levers

State and federal credits worth stacking

Credits that most broker ROI decks omit. Matchbook surfaces these in the employer report.

Hawaii Enterprise Zones (EZ) Partnership Program

Qualified businesses in designated EZs receive a non-refundable Hawaii income tax credit of 80% the first year, declining 10% per year to 20% in year seven, plus a second non-refundable credit equal to the same schedule of annual Unemployment Insurance premiums. Act 2025 (SB125) extended the standard eligibility period from 7 to 9 years and the manufacturing/agriculture GET exemption from 10 to 12 years.

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Hawaii Tax Credit for Research Activities (TCRA)

Refundable state income tax credit for qualified high-technology businesses, mirroring the federal IRC Section 41 base. Annual program cap $5M, per-taxpayer application window runs March 1-31. Matchbook stacks TCRA with federal R&D credits when computing the employer's net after-tax cost of engineering labor.

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Motion Picture, Digital Media, and Film Production Tax Credit

Refundable credit: 22% of qualified Oahu production costs and 27% on neighbor islands. $17M per-production cap and $50M annual statewide cap; $100,000 minimum in-state spend. Matchbook flags this for Hawaii employers whose production payroll runs through the state.

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Federal IRC Section 45F (stacks with Hawaii employer-provided childcare)

Federal employer-provided childcare credit: 25% with $150K cap in 2025; 40% with $500K cap in 2026 (50% with $600K cap for small employers). No direct Hawaii counterpart, but Matchbook surfaces the federal modeled benefit for Hawaii employers evaluating on-site or sponsored care.

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Household programs

State programs that change what your employees should elect

Matchbook coordinates these against DCFSA, FSA, and HSA elections at the household level.

Employer health mandate

Hawaii Prepaid Health Care Act (PHCA)

1974 state law requiring private employers to provide approved health coverage to employees working 20+ hours per week for 4 consecutive weeks who earn at least 86.67 times the state minimum wage per month. Employers pay at least half of single-coverage premium; employee share capped at 1.5% of wages. PHCA is unique in the United States and predates ERISA preemption via a specific federal carve-out.

Matchbook: PHCA inverts the mainland waive-coverage math. An employee's 1.5%-of-wages cap means employer coverage is almost always more affordable than Marketplace for a 20+ hour Hawaii employee, so Matchbook rarely recommends declining employer coverage for a PHCA-eligible worker. For part-time workers below the PHCA threshold, Matchbook still runs the full Marketplace and Med-QUEST path.

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Preschool subsidy

Preschool Open Doors (POD)

State-funded preschool tuition subsidy administered by DHS and PATCH Hawaii. Act 203 (HB692, 2025) expanded eligibility to 2-year-olds and raised income limits, supporting Lt. Gov. Luke's Ready Keiki initiative; prior-year expansion added 3-year-olds. Subsidies pay licensed preschools or DHS-listed exempt center-based providers.

Matchbook: POD subsidies reduce the family's out-of-pocket preschool cost, which reduces the right DCFSA election. Matchbook asks Hawaii families with children under 5 whether they've applied for POD before recommending DCFSA contribution levels.

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Childcare subsidy

Hawaii Child Care Connection (Child Care Subsidy Program)

DHS-administered subsidy for income-eligible working families. Matchbook's DCFSA recommender checks eligibility thresholds before setting the contribution target; CCDF-funded subsidies are income-tested and interact with the DCFSA $5,000 cap and the federal dependent care tax credit.

Matchbook: For families at the eligibility boundary, the DCFSA and the CCC subsidy can both help - but the DCFSA exclusion reduces W-2 income used in some means tests. Matchbook runs the combined cash-flow comparison before recommending an election.

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Health programs

Coverage coordination checkpoints

Med-QUEST (Hawaii Medicaid)

Hawaii's Medicaid program, covering about 396,000 residents. Section 1115 demonstration renewed January 2025 through December 2029. Continuous eligibility for children under 6 (no redetermination to age 6) and 2-year redetermination for ages 6-19 reduces the procedural-termination risk that hit other states during unwinding. 12-month postpartum coverage is now permanent.

Matchbook: Matchbook screens Hawaii dependents against Med-QUEST thresholds before defaulting to the employer family tier, but applies lower procedural-loss probability than Florida/Texas given Hawaii's continuous-eligibility rules.

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ACA Marketplace (Federally Facilitated Marketplace)

Hawaii uses the federal exchange (HealthCare.gov) after shutting down the state-based Hawaii Health Connector. Two issuers - HMSA and Kaiser Permanente - offer Bronze through Platinum plans. 2026 rates rose about 12% weighted average, and enhanced PTC expired end of 2025, so after-subsidy premiums jumped sharply.

Matchbook: Because PHCA already covers 20+ hour employees, the Marketplace path is most relevant in Hawaii for dependents, part-time workers below PHCA thresholds, and family-glitch screens. Matchbook runs the 2026 9.96% affordability check but applies PHCA's 1.5%-of-wages employee cap first.

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Hawaii paid family and medical leave - no state program

Hawaii has no enacted state PFML program as of 2026. HB755/SB852 and SB1054 were introduced in 2025 proposing a DLIR-administered social-insurance PFML with contributions before January 1, 2029; neither bill advanced past crossover. Hawaii Family Leave Law (HFLL) is job-protected but unpaid; TDI covers own-illness wage replacement at 58% up to $837/week in 2025.

Matchbook: Matchbook uses TDI as the baseline wage-replacement assumption for Hawaii employees and does not model a state PFML offset. When a PFML bill enacts, the Hawaii playbook will add the contribution and benefit math.

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Retirement and wealth

State-level retirement and wealth context

Hawaii ABLE Savings Program

Hawaii's Section 529A program for disabled beneficiaries. 2025 contribution limit $19,000; employed beneficiaries may add up to $15,060 more under ABLE to Work. Hawaii enacted a state income tax deduction for ABLE contributions to promote financial security within the disability community.

Matchbook: For Hawaii households with SSI asset-limit exposure, Matchbook routes disability-related spend to ABLE first and credits the Hawaii state income tax deduction, which the Florida ABLE United line cannot claim.

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HI529 - Hawaii's College Savings Program

State-administered 529 plan with $15 minimum contribution. Earnings grow federal and Hawaii state tax-deferred; qualified withdrawals are federal and Hawaii tax-free. Starting July 5, 2025, qualified expenses include certain credentialing expenses. Hawaii does not offer a state income tax deduction for 529 contributions.

Matchbook: Because Hawaii offers no contribution deduction, the home-state tilt toward HI529 is weak - Matchbook evaluates HI529 on fees and glide path against any-state 529s, not on a state tax subsidy.

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Section 132(f) commuter

Pre-tax commuter reality in Hawaii

2026 IRC Section 132(f) cap is $340 per month for transit and vanpooling and $340 per month for qualified parking (up from $325 in 2025). Public Law 119-21 eliminated the qualified bicycle commuting reimbursement for tax years beginning after December 31, 2025.

Parking and state credits

Parking: Honolulu CBD and Waikiki parking often exceeds the $340 monthly cap; Kahului and Hilo parking typically sit well below the cap. TheBus/Skyline monthly passes and HOLO fare-cap spend are well under $340 so transit elections rarely hit the ceiling.

State credit: None - Hawaii has no state-level commuter tax credit. Hele-On fares are $0 islandwide through December 31, 2028, which removes any pre-tax transit benefit rationale for Hawaii Island employees.

Disaster readiness

Hawaii disaster-relief playbook

IRC Section 139 qualified disaster relief payments are not W-2 wages: no FICA, no FUTA, no federal income tax withholding, no Hawaii income tax, and the employer gets a full deduction. Triggered by a federal disaster declaration - Hawaii exposure stacks wildfires (DR-4724-HI Maui, August 2023), hurricanes, tsunamis, and volcanic activity on Hawaii Island.

  • Pre-drafted Section 139 policy template so Hawaii employers can disburse tax-free relief within 48 hours of a federal declaration - battle-tested against the Maui Lahaina wildfire disbursement playbook.
  • Post-event Section 125 election-change guidance: a wildfire, hurricane, or lava event alone is not a listed change-in-status event under Treas. Reg. 1.125-4 - it qualifies only when it triggers a change in residence, employment, or cost-of-coverage.
  • PHCA continuity check: Hawaii employers must maintain health coverage for displaced 20+ hour employees during a declared disaster; Matchbook flags the PHCA obligation separately from the Section 139 cash line.
  • FEMA Individual Assistance interaction: IRS Section 139 payments generally stack with FEMA IA, but Matchbook flags duplication risks in the disbursement log (especially relevant post-Maui).
  • Hawaii-specific employer disaster leave review - Hawaii has no statutory paid disaster leave, so employer policy governs, and TDI covers only own-illness, not disaster displacement.
Matchbook for Hawaii

What we ship specifically for Hawaii employers

  • PHCA-first calibration in the Hawaii employee savings engine - default 20+ hour workers to employer coverage, run Marketplace and Med-QUEST paths only for part-time and dependents.
  • Full UI savings line in the Hawaii employer ROI report, since the $64,500 wage base makes Section 125 salary-reduction UI savings material for nearly every employee (unlike Florida).
  • TDI integration in the wage-replacement model: 58% weekly benefit up to $837/week 2025 maximum; employer offset against short-term disability overlays so the stack is not double-counted.
  • Progressive bracket recomputation engine for Act 46 (GAP II) phased changes in 2025, 2027, and 2029 - state marginal rate lookups must be year-aware.
  • Enterprise Zone credit plus UI-premium credit stacking calculator for Hawaii employers operating in designated EZs, with the SB125 2025 9-year window applied to qualifying dates.
  • POD and Child Care Connection wrap-around logic in the DCFSA recommender, ingesting DHS subsidy thresholds and PATCH-listed provider eligibility.
  • Post-Maui Section 139 playbook template with pre-drafted employer policy, PHCA continuity check, and disbursement duplication safeguards against FEMA IA.
  • Benefits graph ingests: Hawaii DOTAX bracket and credit tables, DLIR DCD PHCA and TDI rate notices, DLIR UI contribution schedule, DBEDT EZ and TCRA allocations, Hawaii Film Office production credits, DHS POD and CCC eligibility, FEMA DR numbers for Hawaii, and 2026 FFM rate filings.
Sources

Primary sources for this playbook

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