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Hawaii PTE Income Tax Credits

For taxable years beginning after December 31, 2022, partnerships and S corporations may elect to pay Hawaii income taxes at the entity level. The term “partnership” includes limited liability companies (LLCs) treated as partnerships for federal income tax purposes. Eligible members of an electing pass-through entity (PTE) may claim a Hawaii income tax credit for their pro rata share of PTE taxes paid by the entity. The tax rate for the PTE is currently 11%. 

The Hawaii PTE income tax credits were enabled through Act 50 of the Session Laws of Hawaii 2023. The stated purpose of Act 50 is to “help Hawaii’s small businesses by allowing taxpayers to deduct Hawaii income taxes paid on their federal income tax returns.”

It is advisable to consult with your tax professional to make informed decisions regarding the Hawaii PTE income tax credits.