HI
Does Hawaii tax tips and overtime?
The federal deduction and the Hawaii deduction are separate questions. Here is where Hawaii actually lands, and why.
How Hawaii builds its tax base
Hawaii starts from your federal adjusted gross income. Both deductions are below-the-line — they reduce federal taxable income but leave AGI untouched — so neither reaches this state's return automatically. Anything you get here had to be legislated separately.
Tips in Hawaii
Still taxedHRS §235-2.3(a) fixes conformity at the IRC "as amended as of December 31, 2024" for taxable years beginning after Dec. 31, 2024 (Act 123, SLH 2025), which predates OBBBA's July 4, 2025 enactment, so IRC §224 is not part of Hawaii's code; independently, Form N-11 line 7 starts from federal AGI and Hawaii then applies its own standard/itemized deductions, so a below-the-line federal deduction could not reduce Hawaii taxable income even if conformed. Caveat: a 2026-session measure moving the conformity date to Dec. 31, 2025 reportedly passed the legislature; I could not verify its final text or its TY2026 effect (capitol.hawaii.gov returns 403), so this determination is stated firmly only for TY2025.
Overtime in Hawaii
Still taxedIdentical mechanism: IRC §225 was enacted July 4, 2025, after Hawaii's Dec. 31, 2024 static conformity date under HRS §235-2.3(a), and Hawaii's N-11 begins at federal AGI (line 7), so the §225 overtime deduction does not reduce Hawaii taxable income; Hawaii tax on the full overtime amount continues. Same TY2026 caveat as tips.
Source: Hawaii Dept. of Taxation, 2025 Form N-11 Instructions, "Changes to Note"; HRS §235-2.3(a), Chapter 235 compilation as of 12/31/2025 (files.hawaii.gov/tax/legal/hrs/hrs_235.pdf) · last reviewed
Whatever your state does, your payroll taxes do not change
Both deductions reduce income tax only. Social Security and Medicare are still charged on the same wages, in every state.