State guide · Hawaii · 2026 rules
S corporation in Hawaii: what the election changes
Hawaii does not tax an S corporation’s ordinary income. The changes are on payroll: unemployment tax on your salary, and a health plan the business may have to provide you.
Choose a state and enter your profit and salary to see the comparison.
The state
Hawaii follows the federal S election; there is no separate state election. The S corporation files Form N-35 each year.
Hawaii taxes an S corporation only on income it owes federal tax on itself, such as built-in gains. An ordinary operating S corporation owes no Hawaii income tax, and neither does a sole proprietorship or single-member LLC.
An LLC that elects stays an LLC with the Business Registration Division, so its annual filing does not change.
Payroll taxes on your salary
Unemployment insurance: 2.40% for a new employer on the first $64,500 of wages in 2026, plus the 0.01% Employment and Training assessment. A sole proprietor’s draws are not covered today. After the election your wages are: a corporation with one owner-employee cannot use the family-corporation exclusion.
Temporary Disability Insurance does not cover an owner of 50% or more, so the election does not start it for you.
Prepaid Health Care
Hawaii’s Prepaid Health Care law requires an employer to provide an approved health plan to each regular employee. In 2026 that means someone who works 20 or more hours a week and earns at least $1,387 a month. The law has no exclusion for an owner, so after the election it reaches you.
The employer pays at least half the premium. Your share is capped at 1.5% of your wages. You can claim an exemption on Form HC-5, for example if another qualified plan already covers you. The calculator leaves this cost out.
The optional pass-through entity tax
Hawaii’s 9% pass-through entity tax is elected each year on Form N-362E, by April 20 for a calendar year. You get a credit for your share of the tax and add that share back to your Hawaii income. The calculator leaves it out.
Worked examples
A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.
| Profit / salary | Statewide |
|---|---|
| $80,000 / $45,000 | about even |
| $120,000 / $60,000 | $2,145 lower |
| $200,000 / $90,000 | $6,836 lower |
Starting payroll in Hawaii
Register for state withholding with the Hawaii Department of Taxation, and for unemployment insurance with the Hawaii Unemployment Insurance Division.
Other states
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- Washington, DC
- West Virginia
- Wisconsin
- Wyoming
Sources
- HRS § 235-122(a)
- Hawaii DCCA BREG, Business Registration fees
- HRS § 235-51.5(b)
- Hawaii Department of Taxation, Pass-Through Entity Taxation FAQ
- Hawaii DLIR, Tax Rate Schedule and Weekly Benefit Amount
- HRS § 383-7(20)
- Hawaii DLIR UI, Employer Frequently Asked Questions
- Hawaii DLIR, Contribution Rates Explained
- HRS § 383-68 (Schedule C column)
- HRS § 392-5(23)-(24)
- Hawaii DLIR DCD, 2026 Maximum Weekly Wage Base and Maximum Weekly Benefit Amount (Dec. 10, 2025)
- HRS § 392-43(a)
- Hawaii DLIR DCD, About Prepaid Health Care
- Hawaii DLIR DCD, FAQ: Prepaid Health Care
- HRS § 393-3 (‘Regular employee’)
Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.