Hawaii Capital Gains Tax 2025-2026 – Hawaii taxes capital gains on investments, real estate, stocks, and other assets. For tax years 2025 and 2026, the state offers favorable treatment for long-term capital gains compared to ordinary income. US taxpayers—whether Hawaii residents or mainland investors selling Hawaii property—must understand how state rules layer on top of federal taxes. This guide uses the latest official data from the Hawaii Department of Taxation and trusted sources to break it down clearly.
Hawaii Capital Gains Tax Rates for Tax Years 2025 and 2026
Hawaii does not tax long-term and short-term capital gains the same way.
- Long-term capital gains (assets held more than 1 year): Taxed at the lesser of your ordinary marginal income tax rate or 7.25%. For most higher-income taxpayers, this caps the state rate at 7.25%.
- Short-term capital gains (assets held 1 year or less): Taxed as ordinary income at Hawaii’s progressive rates, which range from 1.4% to 11% depending on taxable income and filing status.
Hawaii’s individual income tax brackets for 2025 (and unchanged for 2026 unless new legislation passes) are progressive. For example, for single filers in tax year 2025:
- $0 – $19,200: 1.4%
- Higher brackets step up to 11% on income over certain thresholds (full schedules available on the Hawaii DOTAX website).
Important note: The 7.25% cap applies only to net long-term capital gains. Hawaii uses a special Capital Gains Tax Worksheet (detailed in Form N-11 instructions) to compute this.
No rate changes took effect for 2025 or 2026. Proposed bills to raise the cap to 9% or eliminate the preference remain pending and have not been enacted as of April 2026.
How Hawaii’s Capital Gains Tax Compares to Federal Rates?
US taxpayers pay both federal and Hawaii taxes (no deduction for state taxes on capital gains in most cases).
Federal long-term capital gains rates (2025-2026):
- 0%, 15%, or 20% based on taxable income
- Plus 3.8% Net Investment Income Tax (NIIT) for high earners (modified AGI over $200,000 single / $250,000 joint)
Combined effective rate example (long-term gains for a Hawaii resident in the top federal bracket):
- Federal: up to 20% + 3.8% NIIT = 23.8%
- Hawaii: 7.25%
- Total: Up to 31.05% (before any other factors)
Short-term gains face ordinary federal rates (up to 37%) plus Hawaii ordinary rates.
Who Pays Hawaii Capital Gains Tax? Residents vs. Non-Residents
- Hawaii residents: Taxed on worldwide capital gains.
- Non-residents and part-year residents: Taxed only on Hawaii-source gains, such as:
- Sale of Hawaii real estate
- Gains from tangible personal property located in Hawaii
- Certain intangible property if your commercial domicile is in Hawaii
This is critical for mainland US investors flipping Hawaii vacation homes or selling investment property.
Capital Gains Tax on Hawaii Real Estate in 2025-2026
Real estate drives many Hawaii capital gains situations.
- Primary residence exclusion (federal §121) may apply up to $250,000 single / $500,000 joint if ownership and use tests are met.
- Non-residents must consider Hawaii withholding on sales (similar to FIRPTA at the federal level).
- 1031 like-kind exchanges can defer both federal and Hawaii taxes if structured properly.
Always consult a tax professional for multi-state property sales.
How to Report and File Capital Gains in Hawaii?
Hawaii residents use Form N-11 (Resident Individual Income Tax Return). Key steps:
- Report federal capital gains on Schedule D (federal Form 1040).
- Use Hawaii’s Capital Gains Tax Worksheet (in N-11 instructions) to apply the 7.25% cap for long-term gains.
- File by April 20, 2026 for tax year 2025 (no automatic extension beyond federal rules without requesting one).
- Estimated payments required if you expect significant gains.
Non-residents file Form N-15 and may need to withhold tax on Hawaii real estate sales.
Strategies to Minimize Hawaii Capital Gains Tax in 2025-2026
US taxpayers can use these proven tactics:
- Hold assets longer than 1 year to qualify for the 7.25% cap.
- Harvest tax losses to offset gains.
- Use 1031 exchanges for real estate (defers both federal and state tax).
- Consider Opportunity Zones or charitable remainder trusts.
- Time sales around income brackets if your marginal rate is below 7.25%.
- PTE elections for pass-through businesses (flat 9% entity-level rate with no separate capital gains rate).
Proposed Changes and What’s Next for 2026+
Legislation introduced in the 2025-2026 session (e.g., bills to increase the cap to 9% or tax gains as ordinary income) has not passed. Rates remain stable for now, but monitor Hawaii’s legislative session.
Bottom Line: Planning Tips for US Taxpayers
Hawaii’s 7.25% long-term capital gains cap makes it one of the more investor-friendly states, but combined federal + state burdens can still exceed 30% for high earners. Whether you’re a Hawaii resident selling stocks or a mainland investor exiting Hawaii real estate, proactive planning pays off.
For the most accurate calculation, use Hawaii’s official Capital Gains Tax Worksheet and consult a CPA familiar with multi-state taxation. Always verify the latest forms at tax.hawaii.gov.
This article reflects current law as of April 2026 based on Hawaii Department of Taxation publications and Form N-11 (Rev. 2025). Tax laws can change—verify with a qualified tax advisor for your specific situation.