HB1850 • 2026

RELATING TO CAPITAL GAINS TAX.

Taxes

Active

The official status still shows this bill as active or still awaiting another formal step.

Sponsor: SAYAMA, ILAGAN, TAKAYAMA
Last action: 2026-03-12
Official status: Referred to WAM.
Effective date: Not listed

Plain English Breakdown

The official summary indicates that the bill takes effect on July 1, 2026, but the text provided lists an incorrect effective date of July 1, 3000.

Changes to Capital Gains Tax

This bill changes how capital gains tax is calculated for individuals, estates, trusts, and corporations in Hawaii.

What This Bill Does

Taxes the net capital gain of individuals, estates, and trusts at a rate of nine percent as ordinary income starting after December 31, 2026.
Removes the alternative tax for corporations on capital gains that was previously set at four percent.
Increases the corporate capital gains tax to five percent for taxable years beginning after December 31, 2026.

Who It Names or Affects

Individuals who have net capital gains in their income
Estates and trusts with net capital gains
Corporations that earn net capital gains

Terms To Know

Capital Gains Tax: A tax on the profit from selling an asset such as stocks or real estate.
Net Capital Gain: The total capital gains minus any capital losses for a given period.

Limits and Unknowns

The bill does not specify how it will affect taxpayers who are eligible for the county homeowner's exemption.
It is unclear when exactly this law will be enforced, as the effective date listed is July 1, 3000, which seems to be an error.

Amendments

These notes stay tied to the official amendment files and metadata from the legislature.

HD1

Hawaii published version HD1

Plain English: This amendment increases the capital gains tax rate for individuals, estates, and trusts to nine percent and sets a new alternative capital gains tax rate for corporations at five percent.

Increases the capital gains tax rate for individuals, estates, and trusts from 7.25% to 9%
Sets an alternative capital gains tax rate of 5% for corporations

The effective date listed as July 1, 3000 appears incorrect or is a placeholder; the actual implementation date should be clarified.

HD2

Hawaii published version HD2

Plain English: This amendment changes how capital gains tax is calculated for individuals, estates, and trusts by taxing eligible capital gains at a rate no higher than 7.25%, while also removing an alternative tax provision for corporations.

Taxpayers who sell their principal home and are eligible for a county homeowner's exemption will have their net capital gain taxed at a maximum rate of 7.25% instead of the regular rates.
The section related to an alternative tax for corporations is repealed.

The amendment text does not provide specific details on how the new tax calculation interacts with other parts of the capital gains tax system, which may require further clarification or additional legislation.

Bill History

2026-03-12 S
Referred to WAM.
2026-03-12 S
Passed First Reading.
2026-03-12 S
Received from House (Hse. Com. No. 299).
2026-03-10 H
Passed Third Reading as amended in HD 2 with Representative(s) Reyes Oda, Souza voting aye with reservations; Representative(s) Alcos, Amato, Garcia, Gedeon, Kong, Matsumoto, Muraoka, Shimizu voting no (8) and Representative(s) Pierick excused (1). Transmitted to Senate.
2026-03-06 H
Forty-eight (48) hours notice Tuesday, 03-10-26.
2026-03-06 H
Reported from FIN (Stand. Com. Rep. No. 1117-26) as amended in HD 2, recommending passage on Third Reading.
2026-03-03 H
The committee on FIN recommend that the measure be PASSED, WITH AMENDMENTS. The votes were as follows: 15 Ayes: Representative(s) Todd, Takenouchi, Hartsfield, Hussey, Keohokapu-Lee Loy, Kitagawa, Kusch, Lee, M., Miyake, Morikawa, Perruso, Templo, Yamashita; Ayes with reservations: Representative(s) Gedeon, Reyes Oda; 1 Noes: Representative(s) Alcos; and Excused: none.
2026-03-02 H
Bill scheduled for decision making on Tuesday, 03-03-26 2:00PM in conference room 308 VIA VIDEOCONFERENCE.
2026-03-02 H
The committee(s) on FIN recommend(s) that the measure be deferred until 03-03-26.
2026-02-27 H
Bill scheduled to be heard by FIN on Monday, 03-02-26 2:00PM in House conference room 308 VIA VIDEOCONFERENCE.
2026-02-17 H
Passed Second Reading as amended in HD 1 and referred to the committee(s) on FIN with Representative(s) Amato, Reyes Oda, Souza voting aye with reservations; Representative(s) Alcos, Garcia, Gedeon, Matsumoto, Muraoka, Pierick, Shimizu voting no (7) and Representative(s) Cochran, Lee, M., Poepoe excused (3).
2026-02-17 H
Reported from ECD (Stand. Com. Rep. No. 294-26) as amended in HD 1, recommending passage on Second Reading and referral to FIN.
2026-02-04 H
The committee on ECD recommend that the measure be PASSED, WITH AMENDMENTS. The votes were as follows: 6 Ayes: Representative(s) Ilagan, Hussey, Holt, Tam, Templo, Yamashita; Ayes with reservations: none; 1 Noes: Representative(s) Gedeon; and Excused: none.
2026-01-30 H
Bill scheduled to be heard by ECD on Wednesday, 02-04-26 10:00AM in House conference room 423 VIA VIDEOCONFERENCE.
2026-01-26 H
Referred to ECD, FIN, referral sheet 2
2026-01-26 H
Introduced and Pass First Reading.
2026-01-23 H
Pending introduction.

Official Summary Text

RELATING TO CAPITAL GAINS TAX.
Capital Gains Tax; Corporations
Taxes capital gains tax for individuals, estates, and trusts as ordinary income, except for capital gains that are eligible for a county homeowner's exemption. Repeals the alternative capital gains tax for corporations. Applies to taxable years beginning after 12/31/2026. Effective 7/1/3000. (HD2)

Current Bill Text

Read the full stored bill text

HB1850

HOUSE OF REPRESENTATIVES

H.B. NO.

1850

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to capital gains tax
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

����
SECTION
1
.
�
Section 235-51, Hawaii Revised Statutes, is
amended by amending subsection (f) to read as follows:

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"(f)
�
If a taxpayer has a net capital gain for any
taxable year to which this subsection applies, then the tax imposed by this
section shall not exceed the sum of:

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(1)
�
The tax computed at the rates and in the same
manner as if this subsection had not been enacted on the greater of:

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(A)
�
The taxable income reduced by the amount of
net capital gain, or

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(B)
�
The amount of taxable income taxed at a rate
below [
7.25
]
nine
per cent, plus

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(2)
�
A tax of [
7.25
]
nine
per cent of
the amount of taxable income in excess of the amount determined under paragraph
(1).

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This
subsection shall apply to individuals, estates, and trusts for taxable years
beginning after December 31, 1986."

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SECTION
2
.
�
Section 235-71.5, Hawaii Revised Statutes, is
amended to read as follows:

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"
�235-71.5
�

Alternative tax for corporations.
�

Section 1201 (with respect to alternative tax for corporations) of the
Internal Revenue Code of 1986, as amended as of December 31, 1996, shall be
operative for the purposes of this chapter and shall be applied as set forth in
this section.
�
If for any taxable year a
corporation, regulated investment company, or real estate investment trust has
a net capital gain, then, in lieu of the tax imposed by section 235-71, there
is hereby imposed a tax (if such tax is less than the tax imposed under section
235-71) which shall consist of the sum of:

����
(1)
�
A tax computed on the taxable income reduced
by the amount of the net capital gain, at the rates and in the manner as if
this section had not been enacted, plus

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(2)
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The sum of:

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(A)
�
3.08 per cent of the lesser of:

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(i)
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The net capital gain determined by including
only the gain or loss which is properly taken into account for the portion of
the taxable year before April 1, 1987 (i.e., the amount in paragraph (1)), or

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(ii)
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The net capital gain for the taxable year,
plus

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(B)
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[
4
]
Five
per cent of the excess
(if any) of:

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(i)
�
The net capital gain for the taxable year,
over

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(ii)
�
The amount of the net capital gain taken into
account under subparagraph (A)."

����
SECTION
3.
�
Statutory material to be repealed is
bracketed and stricken.
�
New statutory
material is underscored.

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SECTION 4.
�
This Act shall take effect on July 1, 2026.

INTRODUCED BY:

_____________________________

Report Title:

Capital Gains
Tax; Increase

Description:

Increases
the capital gains tax rate for individuals, estates, and trusts to nine per cent.

�
Increases the alternative capital gains
tax for corporations to five per cent.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.