HB 2306 Hawaii House · 2026 Regular Session

RELATING TO INCOME TAX.

Summary

Repeals future adjustments to income tax brackets. For taxable years beginning after 12/31/2026, increases the income tax rates for the three highest income tax brackets by one percentage point each. Increases a taxpayer's applicable percentage of employment-related expenses that is used to calculate the household and dependent care services tax credit. Establishes certain disallowance periods following a final decision that a claim for the credit was due to fraud and that the claim was disallowed. Extends the sunset for amendments made by Act 163, SLH 2023, to the Household and Dependent Care Services Tax Credit, Earned Income Tax Credit, and Food/Excise Tax Credit. Effective 7/1/3000. (HD1)

Issues: ✓ Budget & Taxes

Bill status passed 3 of 5 stages cleared

Introduction

Jan 2026

Committee Review

Mar 2026

House Passage

Mar 2026

Senate Passage

Governor

Introduced Jan 26, 2026 Last action Mar 12, 2026

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What changed between versions

HB2306 → HB2306_HD1 · 5 edits

MODERATE

This bill amends Hawaii's income tax law by establishing new tax brackets and rates for the 2026 tax year and beyond, specifically increasing rates for high-income earners. It also modifies the Child and Dependent Care Tax Credit by expanding the income thresholds and applicable percentages for claiming the credit, while simultaneously adding a disallowance period for fraudulent claims. The bill reorganizes the statute by moving the new tax rate provisions to a new Section 1 and updating the effective date and sunset provisions for related tax credits.

Scope change

The bill expands the scope of the Child and Dependent Care Tax Credit by raising income limits and increasing the percentage of expenses eligible for the credit for higher-income taxpayers. It also introduces a new enforcement mechanism (disallowance period) for fraudulent claims.

TIMELINE

Added a new tax bracket structure effective for taxable years beginning after December 31, 2026, which includes higher tax rates for income levels above $650,000 (joint), $650,000 (head of household), and $487,500 (single/married filing separately).

ELIGIBILITY

Modified the Child and Dependent Care Tax Credit eligibility by raising the income thresholds and increasing the applicable percentage of qualifying expenses for taxpayers with adjusted gross income between $25,000 and $160,000.

ENFORCEMENT

Added a disallowance period provision that prevents taxpayers from claiming the Child and Dependent Care Tax Credit for ten years if a claim is found to be due to fraud, or for two years if a claim is disallowed.

REQUIREMENT

Modified the effective date of the Act to July 1, 3000, and updated the sunset provision for the Child and Dependent Care Tax Credit, Earned Income Tax Credit, and Food/Excise Tax Credit to occur on December 31, 2032.

DEFINITION

Modified the definition of 'adjusted gross income' for purposes of the Child and Dependent Care Tax Credit to align with the Internal Revenue Code definition.

Floor votes

How they voted

This bill passed the House by voice vote (no roll call recorded).

Full legislative history

Actions timeline

Total actions

Key actions

Committee

Mar 12, 2026

Committee

Referred to WAM.

upper

Mar 12, 2026

Introduced

Received from House (Hse. Com. No. 394).

upper

Mar 10, 2026

Lower · Passed

Passed Third Reading with none voting aye with reservations; Representative(s) Alcos, Amato, Garcia, Gedeon, Kong, Matsumoto, Muraoka, Pierick, Reyes Oda, Shimizu, Souza voting no (11) and none excused (0). Transmitted to Senate.

lower

Mar 4, 2026

Lower · Passed

The committee on FIN recommend that the measure be PASSED, WITH AMENDMENTS. The votes were as follows: 16 Ayes: Representative(s) Todd, Takenouchi, Hartsfield, Hussey, Keohokapu-Lee Loy, Kitagawa, Kusch, Lee, M., Miyake, Morikawa, Perruso, Templo, Yamashita, Alcos, Gedeon, Reyes Oda; Ayes with reservations: none; Noes: none; and Excused: none.

lower

Jan 30, 2026

Committee

Referred to FIN, referral sheet 5

lower

Jan 28, 2026

Introduced

Introduced and Pass First Reading.

lower

Jan 26, 2026

Introduced

Pending introduction.

lower

1 primary · 0 co-sponsors