Hawaii Tax Questions for Year 2020
Aloha Valued Client,
 
We have recently been in contact with the state on 2 important issues and just wanted to keep you informed. This information is only one day old!

Issue #1: Unemployment Taxable?

Regarding the treatment of unemployment for the State of Hawaii, the state technical department says

"We are unable to tell you what to expect as a decision from the State Legislation on whether if Hawaii will adopt the new federal provision excluding the first $10,200 of unemployment insurance for certain taxpayers. Please file the 2020 Hawaii tax return as per the old federal position (adding back any federal exclusion amounts not allowed under the old law) and if the Hawaii Legislature conforms to the new federal position taxpayers may amend their 2020 Hawaii tax returns to reflect the change. The Department will not be releasing new forms/instructions if the State conforms to the exclusion retroactively in the summer."

What does this mean to you? Unemployment is taxable to the state of Hawaii, and for now, no exclusion applies. The exclusion of $10,200 per person is only Federal
ISSUE #2: Retirement Distributions Taxable?

Regarding treatment of Early Distributions due to COVID-19 the state technical department says

"No, Hawaii did not conform to the change in federal tax treatment of these distributions, allowing the tax on them to be paid over three years. See page 15 of “Digest of Tax Measures” for 2020, available at https://files.hawaii.gov/tax/legal/legis/2020/20digest.pdf."

What does this mean to you? Non qualified retirement distributions are taxable to the state of Hawaii, and for now, no exclusion applies. The ability to spread tax over 3 years is only Federal
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