Does Hawaii follow the federal no-tax-on-tips and overtime deductions?
DOES NOT CONFORM (overtime all years; tips 2025 — 2026+ unconfirmed)
Hawaii does not follow the federal deductions for state income tax. You can still claim the tips and overtime deductions on your federal return (Schedule 1-A) — they simply do not reduce your Hawaii state tax. Do not assume your state return treats this income the way your federal return does.
Verified against the official state source below — last verified October 26, 2026
| Deduction | Hawaii position |
|---|---|
| Federal tips deduction (IRC §224) | Does not conform 2025; 2026+ unconfirmed |
| Federal overtime deduction (IRC §225) | Does not conform |
What the state itself says
Act 123 — "'Internal Revenue Code' means subtitle A, chapter 1, of the federal Internal Revenue Code of 1986, as amended as of December 31, 2024". HB 2329 CD1 adds to the HRS §235-2.3(b) non-operative list: "Section 225 (with respect to qualified overtime compensation)".
- Official source
- Act 123, S.B. 1464 (Session Laws of Hawaii 2025, approved May 29, 2025) ; HB 2329, CD1 (2026 conformity act, reported as Act 35, approved May 26, 2026 — enactment confirmed via legislative tracking)
- Tax years covered
- 2025 (Act 123 conformity date Dec. 31, 2024 — pre-OBBBA, so neither deduction). 2026+ (HB 2329: conformity date Dec. 31, 2025, with §225 expressly non-operative; §224 not listed as non-operative).
Hawaii uses fixed-date conformity with operative/non-operative section lists (HRS §§235-2.3, 235-2.4) and computes from federal AGI concepts, not federal taxable income. Overtime is decoupled in every year. Tips: the enacted 2026 text leaves §224 operative, but no Hawaii DOTAX source expressly confirms a claimable tips deduction for 2026+ — treat tips-2026+ as UNCONFIRMED, not as conforming, until DOTAX guidance is checked.
Your federal deduction is separate
Whatever your state does, the federal deductions run on their own rules: check your W-2 codes with the W-2 Code Checker, estimate with the Tips Calculator and Overtime Calculator, and see the glossary for any term. All state positions: the state-by-state index.
State position verified October 26, 2026 from the official source above. State guidance changes; confirm on the source before filing. This page is general information, not tax advice.