HI business tax rate  2012, 2013, 2014 Hawaii State Corporate Income Tax 2016

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Hawaii Corporate Income Tax Brackets

Tax Bracket (gross taxable income) Tax Rate (%)
$0+ 4.400%
$25,000+ 5.400%
$100,000+ 6.400%

Hawaii collects a state corporate income tax at a maximum marginal tax rate of 6.400%, spread across three tax brackets. There are a total of thirty two states with higher marginal corporate income tax rates then Hawaii.

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Hawaii Business Tax

What is the Hawaii corporate income tax?

HI corporate income tax

Hawaii's corporate income tax is a business tax levied on the gross taxable income of most businesses and corporations registered or doing business in Hawaii. The Hawaii corporate income tax is the business equivalent of the Hawaii personal income tax, and is based on a bracketed tax system. Similar to the personal income tax, businesses must file a yearly tax return and are allowed deductions such as wages paid, cost of goods sold, and other qualifying business expenses.

What kind of businesses have to pay the Hawaii corporate income tax?

In general, all businesses operating in Hawaii which are not registered as a flow-through entity (like a sole proprietorship, a partnership, or an S-Corporation) must report their income and pay both Hawaii and Federal corporate income taxes on their earnings. The most commonly used business structure that is subject to corporate taxes is a C-Corporation.

Because C-Corporations pay corporate taxes on their revenue in addition to the personal income taxes shareholders and owners pay on profits withdrawn from the company, profits received from a C-Corporation are subject to a phenomenon known as double taxation.

S-Corporations and other flow-through entities aren't subject to the double taxation of revenue imposed on a C-Corp, because they aren't required to pay corporate taxes on their revenue. However, the owners or members of the corporation must report their share of the corporation's income on their personal tax returns and pay Hawaii and federal income tax.

All incorporated Hawaii businesses, regardless of whether or not they are required to pay any taxes, should file at least an informational tax return with the Hawaii Department of Revenue as well as a federal business tax return (Form 1120) with the IRS.

Hawaii Corporate Income Tax Comparison
A home business grossing $55,000 a year pays $2,720.00
A small business earning $500,000 a year pays $2,450.00
A corporation earning $10,000,000 a year pays $638,750.00

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Hawaii Nonprofit Tax Exemptions

Certain nonprofit entities registered in Hawaii may be able to exempt some or all of their qualifying income from Hawaii and federal income taxes. Specifically, certified Hawaii 501(c) nonprofit corporations are exempt from the Hawaii corporate income tax. Some of the most common 501(c) organizations include:

Educational & Scientific Institutions
Nonprofit educational and scientific groups are tax-exempt, including nonprofit schools and colleges and certain research institutions. Covered under § 501(c)(3) of the IRC.
Labor Unions
Labor unions and worker's organizations are exempt from taxation on dues and other forms of income. Covered under § 501(c)(4) and § 501(c)(5) of the IRC.
Tax-Exempt Recreational Organizations
Social clubs and recreational groups may collect dues and other funds as a tax-free organization as long as the primary purpose of the group is not for profit. Covered under § 501(c)(7) of the IRC.
Tax-Exempt Religious Institutions
Bona-fide religious institutions including churches, synagogues, and mosques are exempt from corporate income taxes under § 501(c)(3) of the IRC
Tax-Exempt Charities
Bona-fide charities are exempt from all corporate income taxes, including both religious and non-religious charities. Covered under § 501(c)(3) of the IRC.

In order to gain Hawaii tax-exempt status, a corporation must qualify as a 501(c) and obtain a Nonprofit Tax-Exempt ID Number from the IRS. Hawaii may also require nonprofits to file additional paperwork with the Hawaii Department of Revenue to gain exemption from Hawaii's corporate taxes.

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Federal Corporate Income Tax Brackets 2016

Tax Bracket ($) Marginal Corporate Income Tax Rate
$0 to $50,000 15%
$50,000 to $75,000 $7,500 + 25% Of the amount over 50,000
$75,000 to $100,000 $13,750 + 34% Of the amount over 75,000
$100,000 to $335,000 $22,250 + 39% Of the amount over 100,000
$335,000 to $10,000,000 $113,900 + 34% Of the amount over 335,000
$10,000,000 to $15,000,000 $3,400,000 + 35% Of the amount over 10,000,000
$15,000,000 to $18,333,333 $5,150,000 + 38% Of the amount over $15,000,000
$18,333,333 and up $6,416,667 + 35% of the amount over $18,333,333

In addition to the Hawaii corporate income tax, Hawaii corporations must also pay the federal corporate income tax. Like the personal income tax the federal business tax is bracketed based on income level, with eight corporate tax brackets.

The federal corporate tax's brackets differ from the personal income tax in that the brackets are not completely progressive (the last tax bracket is not the highest). This allows the corporate tax burden to be spread more evenly among companies with various revenue levels. The current corporate tax rates have been in effect since 1994 (unlike the federal income tax brackets, which are updated yearly for inflation).

All Hawaii state taxes are deductible from gross income when calculating federal taxes, so any Hawaii corporate income tax paid can be deducted from a business' gross taxable income before calculating your federal taxable income.


1 A printable PDF document of the 2016 state corporate income tax brackets can be downloaded here External Link