Complete Guide to Hawaii LLC Taxes in 2025
Hawaii presents one of the most unique and complex tax environments for LLC owners in the United States. The Aloha State combines a graduated individual income tax with rates reaching 11% -- the highest state income tax rate in the country -- with its distinctive General Excise Tax (GET), which functions as a gross receipts tax on virtually all business activity. Despite this complexity, Hawaii's annual report fee of just $15 makes the compliance side remarkably affordable. This comprehensive guide covers everything Hawaii LLC owners need to know about their state tax obligations in 2025.
How Hawaii Taxes LLCs
Hawaii follows the federal classification of LLCs for state tax purposes, treating them as pass-through entities by default. This means the LLC itself does not pay Hawaii income tax. Instead, profits and losses flow through to the individual members, who report their distributive share on their personal Hawaii income tax returns.
For a single-member LLC, income flows to Schedule C of the federal return and then to Hawaii Form N-11 (Resident Individual Income Tax Return) or Form N-15 for nonresidents. For a multi-member LLC, the LLC files Hawaii Form N-20 (Partnership Return of Income) as an informational return, and each member receives a Schedule K-1 showing their share of income, deductions, and credits.
However, unlike many states, Hawaii imposes the General Excise Tax (GET) directly on the business entity. This means that even though your LLC does not pay state income tax, it must still register for, collect, and remit GET on its gross receipts. This dual-layer system -- pass-through income tax plus entity-level GET -- makes Hawaii one of the more heavily taxed states for business operations.
Key Point: Hawaii's GET is not a sales tax -- it is a tax on the business's gross income (receipts). This means it applies to services, wholesale transactions, rental income, interest, and virtually every form of business revenue, not just retail sales of goods. The GET cannot be directly offset by business expenses or deductions.
Hawaii General Excise Tax (GET) Explained
The General Excise Tax is Hawaii's primary business-level tax and one of the broadest-based transaction taxes in the United States. Understanding GET is essential for every Hawaii LLC owner because it applies to virtually all business activity in the state.
GET rates vary depending on the type of activity and the county:
| Activity Type | Base GET Rate | Oahu Surcharge | Oahu Total |
|---|---|---|---|
| Retail Sales & Services | 4.0% | +0.5% | 4.5% |
| Wholesale Sales | 0.5% | +0.5% | 1.0% |
| Insurance Commissions | 0.15% | +0.5% | 0.65% |
| Sublease Rental Income | 4.0% | +0.5% | 4.5% |
| Manufacturing (Tangible Property) | 0.5% | +0.5% | 1.0% |
A critical feature of GET that many new LLC owners overlook is tax pyramiding. Because GET applies at each level of the supply chain, the effective tax burden can exceed the nominal rate. For example, if you purchase supplies from a wholesaler who pays GET, and then you sell the finished product and pay GET on your full retail price, the tax compounds. Some economists estimate the effective burden of GET at 6-7% when pyramiding is factored in.
Businesses are permitted (but not required) to visibly pass the GET on to customers. When they do, they typically charge 4.166% (on Oahu, 4.712%) rather than the flat 4% or 4.5%, because the amount collected from the customer is itself subject to GET. This "tax on tax" calculation is a unique feature of Hawaii's system.
Hawaii Individual Income Tax Rates
Hawaii has one of the most progressive income tax structures in the nation, with 12 tax brackets and a top marginal rate of 11% -- the highest of any US state. Here are the 2025 brackets for single filers:
| Taxable Income | Rate |
|---|---|
| $0 - $2,400 | 1.40% |
| $2,401 - $4,800 | 3.20% |
| $4,801 - $9,600 | 5.50% |
| $9,601 - $14,400 | 6.40% |
| $14,401 - $19,200 | 6.80% |
| $19,201 - $24,000 | 7.20% |
| $24,001 - $36,000 | 7.60% |
| $36,001 - $48,000 | 7.90% |
| $48,001 - $150,000 | 8.25% |
| $150,001 - $175,000 | 9.00% |
| $175,001 - $200,000 | 10.00% |
| Over $200,000 | 11.00% |
For married filing jointly, the bracket thresholds are roughly doubled. The combination of high marginal rates and a relatively low top-bracket threshold ($200,000 for single filers) means that Hawaii LLC owners with moderate-to-high incomes face a substantial state tax burden that far exceeds most other states.
Tax Tip: Hawaii LLC owners with net income exceeding $50,000 should strongly evaluate S-Corporation election. By paying yourself a reasonable salary and taking remaining profits as distributions, you can avoid self-employment tax on the distribution portion. Use our S-Corp Tax Calculator to compare the savings -- which can be particularly large given Hawaii's high state rates.
Hawaii LLC Annual Filing Requirements
Every Hawaii LLC must file an Annual Report with the Hawaii Department of Commerce and Consumer Affairs (DCCA). The filing fee is just $15, making it the cheapest annual compliance requirement in the entire nation alongside a handful of other states. For comparison, California charges $800+, Massachusetts charges $500, and even "business-friendly" states like Delaware charge $300.
The Annual Report is due by the end of the calendar quarter in which the LLC was originally organized. For example, if your LLC was formed on February 14, the annual report is due by March 31 each year. Late filing results in a $25 late fee, and persistent failure to file can lead to administrative dissolution.
Federal Taxes for Hawaii LLC Owners
Beyond Hawaii state taxes and GET, LLC members must also pay federal taxes. The primary federal obligations include:
- Self-Employment Tax (15.3%): Covers Social Security (12.4% up to the $176,100 wage base in 2025) and Medicare (2.9% on all earnings). An additional 0.9% Medicare surtax applies to earnings above $200,000 for single filers ($250,000 for married filing jointly).
- Federal Income Tax: LLC income is added to your other income and taxed at applicable federal bracket rates (10% to 37% for 2025).
- Qualified Business Income (QBI) Deduction: Eligible LLC owners may deduct up to 20% of qualified business income under IRC Section 199A, subject to income limitations and specified service trade or business (SSTB) rules.
Hawaii LLC Formation Costs
Forming an LLC in Hawaii requires the following costs:
- Articles of Organization: $50 filing fee with the DCCA (online filing)
- Registered Agent: Required; must be a Hawaii resident or authorized business entity. Commercial services charge $50-$200/year.
- Trade Name Registration: $25 if operating under a name different from your LLC's registered name
- GET License: Free; required before conducting business. Apply through Hawaii Tax Online.
- EIN (Federal Tax ID): Free from the IRS
- Annual Report: $15/year (ongoing)
- Operating Agreement: Not legally required but strongly recommended
Hawaii LLC Filing Deadlines
| Filing Type | Deadline | Extension Available |
|---|---|---|
| Single-Member LLC (Form N-11) | April 20 | Yes, to October 20 |
| Multi-Member LLC (Form N-20) | March 20 | Yes, to September 20 |
| GET Returns (Form G-45) | Monthly/Quarterly/Semi-Annual | No |
| GET Annual Return (Form G-49) | April 20 | Yes, 6-month extension |
| Annual Report (DCCA) | End of formation quarter | No extension |
| Estimated Tax Payments (Form N-1) | Apr 20, Jun 20, Sep 20, Jan 20 | No extension |
Important: Hawaii uses April 20 as its individual income tax deadline rather than the federal April 15. This gives Hawaii filers an extra five days. However, GET periodic returns follow their own schedule -- monthly filers are due by the 20th of the following month, quarterly filers by the 20th of the month following the quarter.
Estimated Tax Payments in Hawaii
Hawaii requires estimated tax payments from LLC members who expect to owe $500 or more in state income tax after withholding and credits. This is a lower threshold than many states, meaning most profitable LLC owners will need to make quarterly estimated payments.
Payments are made using Hawaii Form N-1 (Declaration of Estimated Individual Income Tax) on the following schedule: April 20, June 20, September 20, and January 20 of the following year. To avoid underpayment penalties, you must pay at least 60% of the current year's tax liability or 100% of the prior year's tax through estimated payments and withholding.
Hawaii vs. Other Pacific and Western States for LLC Taxes
| State | Income Tax Rate | Annual Fee | Special Taxes |
|---|---|---|---|
| Hawaii | 1.4-11% graduated | $15 | GET 4-4.5% |
| California | 1-13.3% | $800+ franchise tax | None for LLCs under $250K |
| Oregon | 4.75-9.9% | $100 | CAT 0.57% on commercial activity |
| Washington | 0% (no income tax) | $60 | B&O tax 0.471-3.3% |
| Nevada | 0% (no income tax) | $350 | Commerce tax over $4M revenue |
| Alaska | 0% (no income tax) | $100 biennial | None |
Hawaii's combined tax burden -- high income tax rates plus GET on gross receipts -- makes it one of the most expensive states for LLC operation. However, the extremely low $15 annual report fee and the lack of a separate franchise tax partially offset this. The real cost driver is the combination of up to 11% income tax and 4-4.5% GET on all gross receipts, which can push effective total state tax rates above 15% for many businesses.
Hawaii Transient Accommodations Tax (TAT)
Hawaii LLCs operating in the hospitality or short-term rental industry face an additional tax layer: the Transient Accommodations Tax (TAT). As of 2025, the TAT rate is 10.25% on the gross rental proceeds from furnished accommodations rented for periods of less than 180 consecutive days.
In addition to the state TAT, Oahu imposes a county TAT surcharge of 3%, bringing the total on Oahu to 13.25%. Other counties (Maui, Kauai, Hawaii Island) have varying surcharges. This tax is in addition to the GET, meaning a short-term rental LLC on Oahu could face GET of 4.5% plus TAT of 13.25% on the same gross rental income -- a combined rate of 17.75% before income tax.
Pass-Through Entity Tax Election (Act 115)
Hawaii enacted a Pass-Through Entity Tax (PTET) election that allows eligible LLCs taxed as partnerships or S-Corporations to elect to pay state income tax at the entity level. This election was designed as a workaround to the federal $10,000 SALT deduction cap imposed by the Tax Cuts and Jobs Act.
When a qualifying LLC makes this election, the entity pays Hawaii income tax directly at the highest individual rate (11%). The members then receive a corresponding credit on their individual Hawaii returns, effectively allowing the state tax to be deducted as a business expense at the federal level. Given Hawaii's high rates, this election can produce substantial federal tax savings for LLC owners in higher brackets. The election must be made annually and is irrevocable for that tax year.
Hawaii Business Incentives and Credits
Despite its high tax rates, Hawaii offers several incentives that may benefit LLC owners:
- High Technology Business Investment Tax Credit (Act 221): Credits for qualified research and development expenditures in Hawaii's technology sector.
- Enterprise Zone Program: Tax incentives for businesses operating in designated enterprise zones, including GET exemptions and income tax credits.
- Renewable Energy Technologies Income Tax Credit: Credit for solar, wind, and other renewable energy systems installed in Hawaii.
- Motion Picture, Digital Media, and Film Production Income Tax Credit: Up to 25% credit on qualified production expenditures.
- Important Ag Land Qualified Tax Credit: Credits for agricultural businesses using qualified important agricultural land.
Common Hawaii LLC Tax Mistakes
Avoid these frequent errors that Hawaii LLC owners make with their taxes:
- Treating GET like a sales tax: GET applies to gross receipts from all business activities, not just retail sales. Services, wholesale, and rental income are all subject to GET.
- Forgetting the Oahu surcharge: If your LLC operates on Oahu, remember the additional 0.5% county surcharge on GET.
- Missing GET periodic returns: GET returns are separate from income tax returns and have their own filing schedule. Filing your income tax does not satisfy your GET obligation.
- Underestimating total tax burden: With income tax up to 11% plus GET of 4-4.5% on gross receipts, Hawaii's effective tax rate is among the highest in the nation.
- Not evaluating PTET election: The pass-through entity tax election can save significant federal taxes by converting state tax to a business deduction.
- Ignoring S-Corp election: Given Hawaii's high income tax rates, the self-employment tax savings from S-Corp election can be particularly valuable.
Hawaii LLC Tax Deductions
Hawaii generally uses federal adjusted gross income as the starting point for state tax calculations, with certain Hawaii-specific modifications. Key deductions for Hawaii LLC owners include:
- Home Office Deduction: Deductible at both federal and state levels using simplified or actual expense method
- Vehicle Expenses: Standard mileage rate of 70 cents per mile for 2025, or actual expenses
- Health Insurance Premiums: Self-employed health insurance deduction available as above-the-line deduction
- Retirement Contributions: SEP-IRA, Solo 401(k), and SIMPLE IRA contributions are deductible
- GET Paid: GET paid by your LLC is deductible as a business expense on your federal return, reducing your federal and Hawaii income tax
- Section 179 and Depreciation: Hawaii generally conforms to federal depreciation rules
Hawaii Conformity Note: Hawaii does not fully conform to all federal tax provisions. For example, Hawaii has historically decoupled from certain federal bonus depreciation provisions and may have different treatment for some deductions. Always review Hawaii Form N-11 instructions for current-year additions and subtractions to federal AGI.
Dissolving a Hawaii LLC
To dissolve a Hawaii LLC, you must file Articles of Termination with the DCCA (filing fee: $50). Before filing, settle all debts, distribute remaining assets, and file final tax returns -- including final Hawaii income tax returns and a final GET return (Form G-49) marked as "final." Cancel your GET license with the Hawaii Department of Taxation and ensure all GET periodic returns are filed and paid through the date of dissolution.
Retain all business records for at least five years after dissolution, as Hawaii's statute of limitations for tax assessments is three years from the later of the filing date or the due date, but can extend to six years in cases of substantial understatement.