Hawaii Withholding Tax 2026: Rates, Booklet A Tables & Employer Filing Guide

2026 Booklet A: What Changed

Every year, the Hawaii Department of Taxation publishes Booklet A — the official withholding tables you’re required to use. For 2026 the extra lump sum withholding allowance went up by $2,700, which lowers withholding for every employee on your payroll.

Here’s where it matters: if your payroll software or manual calculations still use the 2025 lump-sum figure of $1,650, you’re over-withholding on every paycheck. Worth checking before your next payroll.

Withholding Allowances and Form HW-4

This trips up mainland employers all the time: Hawaii does not use the federal W-4 for state withholding. Employees need to fill out Form HW-4, which still uses the old allowance-based system the IRS dropped back in 2020.

Each allowance reduces the taxable wage amount before you apply the withholding table. For 2026, one allowance is worth $1,144 per year — roughly $95.33/month if you run monthly payroll.

A few things employers consistently get wrong with HW-4: New employees need to complete it before they start work, not during onboarding paperwork cleanup the following week. If an employee never turns one in, you don't get to hold the payroll — you withhold as if the employee were single with zero allowances, period. When an employee hands you a replacement HW-4, it takes effect with the first wage payment on or after the 30th day after you receive it, though you may choose to apply it sooner. One thing that confuses people who've only done payroll in other states: the federal W-4 and the Hawaii HW-4 are completely separate documents. You need both on file for every employee. The IRS redesigned W-4 in 2020 and dropped allowances entirely — Hawaii didn't follow. HW-4 still works on the old allowance system, which is why the two forms don't line up and why employees often ask why they're filling out "two W-4s."

Hawaii State Income Tax Brackets 2026

Hawaii has 12 income tax brackets for 2026, from 1.4% to 11%. If you’re used to a flat-rate or 3-bracket state, this is a different animal. These are the rates on the employee’s annual return. Paycheck withholding uses the separate Booklet A withholding rate schedule, explained below the table.

Married filing jointly thresholds are double the single amounts, so the 11% bracket starts above $650,000. For withholding, the 2026 Booklet A annualized method works like this: annualize the employee’s gross wages, subtract $1,144 for each HW-4 allowance and the $4,350 extra lump sum withholding allowance, apply the Booklet A withholding rate schedule (1.40% up to 7.90% for 2026), then divide the annual tax back down to your pay period. It sounds manageable until you’re doing it for 15 employees with different filing statuses and allowance counts. After a few cycles, most employers either move to Booklet A’s actual withholding tables (which do the math for you by income level) or hand it off to a Hawaii payroll service. Manual bracket calculations every pay period are where errors happen.

Filing Form HW-14: Deadlines and Schedule

Form HW-14 is Hawaii’s withholding tax return — the form where you report what you collected from employees and hand it over to the state. If you’re familiar with federal Form 941, it’s the same concept, just state-level. Where employers consistently run into trouble is the zero-balance filing requirement: Hawaii expects a return even if you had zero employees and zero withholding for the period. Miss that filing and DOTAX sends a penalty notice. It’s an easy thing to overlook when business is slow, and the penalties aren’t trivial.

E-Filing Requirement: $40,000 Threshold

Once your annual withholding tax liability exceeds $40,000, paper is no longer an option. You must file your withholding tax forms electronically through Hawaii Tax Online.

Starting January 1, 2026, a second threshold applies to year-end forms: if you file 10 or more Forms W-2 and/or HW-2 with the state in a calendar year, you must file them electronically, regardless of your withholding liability.

Lump-Sum and Supplemental Wage Withholding

This is where the name causes confusion. The extra lump sum withholding allowance of $4,350 is not a special rule for bonuses. Booklet A’s annualized method subtracts it from every employee’s annualized wages, on top of $1,144 for each HW-4 allowance. Booklet A’s own example: a single employee paid $500 a week who claims three allowances has $26,000 in annual wages. Subtract $3,432 for the allowances and $4,350 for the extra allowance, and $18,218 is subject to withholding — $497.99 for the year, or $9.58 a week.

Supplemental wages follow a different rule. When supplemental wages such as bonuses, commissions or overtime pay are paid at the same time as regular wages, Booklet A says to withhold as if the total were a single wage payment for the regular payroll period. If they are paid at a different time, you may figure the withholding by combining them with the regular wages for the current payroll period or for the last preceding payroll period in the same calendar year. Make sure your payroll software updated to the 2026 tables; a system still running the old $1,650 figure over-withholds on every paycheck.

Frequently Asked Questions