Hawaii Senate Approves Bill 3125, Creating 13% Top Tax Rate for Millionaires

(HAWAII) – Hawaii lawmakers approved Senate Bill 3125 on April 28, 2026, creating a new millionaire tax bracket that applies an effective 13% top marginal rate to household income above $1 million for tax year 2026, with returns filed in 2027.

The new rate works as a 2% surcharge on income over $1 million, layered on top of Hawaii’s existing top ordinary income rate of 11%. The change leaves lower brackets in place and shifts tax thresholds upward, a move lawmakers said would reflect higher wages and living costs.

The package was built to do two things at once: raise revenue at the top and preserve tax relief for most residents. Lawmakers said roughly 90% of local taxpayers would benefit from the threshold changes, while households above $1 million would face the new top rate on income over that line.

That matters most for high-income wage earners, investors with large ordinary income, and owners of pass-through businesses who report business income on individual returns. The bill text, as described by legislative leaders, also included language meant to protect small business owners who file as individuals rather than through a corporation.

The change is a Hawaii income tax change, not a federal one. Immigrants and visa holders who live and work in Hawaii still must sort out federal residency rules separately under

That example produces $4,000 in added Hawaii tax from the surcharge itself. The exact bill will still depend on deductions, filing status, and how Hawaii computes taxable income. High earners with uneven income should watch estimated payment timing closely.

Lawmakers paired the increase with relief lower down the rate schedule. They said a typical family of four would save about $300 to $400 a year, or roughly $2,000 over five years. The state framed the package as a budget-gap measure that avoided broader tax increases.

📅 Deadline Alert: The new bracket applies to tax year 2026. Hawaii taxpayers will generally report it on returns filed in 2027. Estimated tax payments due during 2026 may need adjustment now.

Senate Bill 3125 did not adopt more aggressive proposals that circulated during the session. One proposal would have taxed long-term capital gains as ordinary income. Another would have raised the capital gains cap from 7.25% to 9%. Neither made the final package.

Those proposals mattered because Hawaii still taxes wage income and investment income differently at the top. Ordinary income for high earners reaches 11% under the prior structure, while long-term capital gains remain capped at 7.25%. Legislative estimates said more than 70% of long-term capital gains go to taxpayers with incomes above $400,000.

The revenue estimates attached to those earlier capital gains ideas were not small. Taxing capital gains as ordinary income was projected to raise about $85 million in the first year from residents alone. Raising the cap to 9% was projected to raise about $44 million. Similar ideas appeared in 2024, then fell away again in 2026.

No Hawaii property tax change for millionaires was included in this package. The bill also mentioned a 0.5% annual surcharge on assessed value above $1 million for some non-owner-occupied property starting July 1, 2026, but that measure was not part of Hawaii’s income tax package.

A separate bill, Senate Bill 2866, moved alongside the tax debate and expands rent help for seniors, also known as kupuna. It directs $2.2 million over two years to the Hawaii Public Housing Authority to meet demand from older renters on fixed incomes. That is housing aid, not an income tax rate change.

Immigrants with Hawaii income should treat the state change as one piece of a larger filing picture. A new green card holder or H-1B worker with foreign accounts still may need FinCEN Form 114, known as the FBAR, if aggregate balances exceeded $10,000. Some taxpayers also must file Form 8938 with their federal return. IRS rules are outlined at .