Updated: June 21, 2023
In Hawaii, everything is a little bit more laid back. The sun’s out, the surf’s up, and life is good. That’s why you started a small business in The Aloha State. However, whether you own a surf shop in Honolulu or a bed & breakfast in Maui, there’s one thing that isn’t laid back whatsoever: payroll taxes.
We want you to focus on your business without having to worry about payroll taxes, so we’ve designed a nifty payroll calculator that can figure out all of the federal and Hawaii state payroll taxes for you and your employees. All you have to do is input wage and W-4 information for each employee into the calculator, and it will do the rest of the work for you.
Federal payroll taxes for Hawaii employers
First of all, let’s give Uncle Sam his due. Here’s a quick rundown of the components that go into federal tax withholdings. For a more detailed explanation on all of the steps below, head on over to our comprehensive step-by-step guide.
- Gross wages, which is simply the amount of money an employee has earned during the last pay period.
- For hourly employees, multiply the number of hours worked by their pay rate — and make sure you don’t forget to take overtime into consideration.
- For salaried employees, divide each employee’s annual salary by the number of pay periods you have over the course of a year.
- Bonuses, commissions, and tips are all part of gross wages as well (We also have a net to gross pay calculator if you want to give it a try).
- Subtract any pre-tax withholdings. If your employees have 401(k) accounts, flexible spending accounts (FSA) or any other pre-tax withholdings, subtract them from gross wages prior to applying payroll taxes.
- Deduct federal income taxes, which can range from 0% to 37%. We won’t get into the nitty-gritty here, but you can find further withholding information through the IRS Publication 15-T.
- Deduct and match any FICA taxes to cover Medicare and Social Security taxes:
- For Social Security tax, withhold 6.2% of each employee’s taxable wages until they have earned $160,200 in a given calendar year. Employers must match this tax.
- For Medicare tax, withhold 1.45% of each employee’s taxable wages until they have earned $200,000 in a given calendar year. Employers also must match this tax. For employees who earn more than $200,000 per year, you’ll need to withhold an Additional Medicare Tax of 0.9%, which brings the total employee Medicare withholding above $200,000 to 2.35%. Employers are not responsible for paying the Additional Medicare Tax.
- Pay FUTA unemployment taxes, which is 6% of the first $7,000 of each employee’s taxable income, which comes out to a maximum tax of $420 per employee per year. Only employers are responsible for paying this tax. FUTA taxes come with a huge caveat that you will want to know about. You can claim a tax credit of up to 5.4% for state unemployment tax you pay, as long as you pay in full and on time. It’s an easy way to save a whopping 90%, so make sure you take advantage! Because only you as the employer are responsible for paying FUTA taxes, you don’t need to withhold FUTA from your employees’ paychecks.
- Subtract any post-tax deductions. Most of your employees won’t have any post-tax deductions, but you might need to withhold things like court-ordered wage garnishments, child support, etc. Make sure you take these into consideration as well.
Hawaii (HI) state payroll taxes
Now that we’re done with federal taxes, let’s look at Hawaii state income taxes. Hawaii charges a progressive income tax, broken down into a whopping 12 tax brackets, and they range from 1.4% on the low end to 11% on the high end. Employees who earn more than $200,000 a year will hit the highest tax bracket.
Hawaii state unemployment insurance (SUI)
As an employer in Hawaii, you have to pay unemployment insurance to the state. The 2023 tax rates range from 1.7% to 6.2% on the first $56,700 in wages paid to each employee in a calendar year.
If you’re a new employer (congratulations!), you pay a flat rate of 4%.
In addition, you are responsible for paying what’s called the Employment and Training Assessment (E&T) Rate, which is 0.01%.
For the complete SUI tax rate schedule, head on over to the official State of Hawaii unemployment insurance website.
Cut Those Paychecks!
That’s all she wrote! You’ve checked it off your to-do list so you can move onto the important things. Once each employee’s net pay is calculated (after taking deductions and withholdings into consideration), you’re in the clear.
All you have to worry about is getting your employees paid on time as well as setting aside whatever you owe in FICA and unemployment taxes. Those numbers can add up quickly!
You will need to fill out Form 941 to file federal taxes on a quarterly basis, and complete Form 940 to report your annual FUTA liabilities. You can pay taxes online using the EFTPS payment system. All the IRS employment tax due dates can be found here.
More Hawaii payroll tax resources:
As if that wasn’t enough, here are some helpful links that can if you would like to learn more about Hawaii payroll taxes:
These rates are based on local legislation and can change at any time. Always consult a tax professional if you are unsure about your obligations.
More helpful payroll calculators for Hawaii employers
Employers in Hawaii can use the calculator at the top of this page to quickly figure out their employees’ gross pay, net pay, and deductions (and feel confident when cutting paychecks). That being said, there can be times when companies need to delve a little deeper into the numbers. For example, do you occasionally reward your top-performing employees with bonuses? Remember that these payments are supplemental wages in the eyes of the IRS and require taxes to be withheld. Additionally, you may need to calculate an employee’s final paycheck if they take a position with another company. So, if you can use a little more help managing the math, check out some of the calculators listed below.