RELATING TO TAXATION.

SB2863

THE SENATE

S.B. NO.

2863

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

RELATING
TO TAXATION
.

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

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SECTION 1.
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The
legislature finds that family caregivers are the backbone of the long-term care
system in the State.
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AARP's latest
report, "Caregiving in the U.S. 2025:
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Caring Across States", found that about
260,000 Hawaii residents are family caregivers, providing largely unpaid and
unsupported care to older parents, spouses, and other loved one.

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Family caregivers provide more than
$2,600,000,000 in unpaid care each year in Hawaii, helping adult family members
live independently at home and in their communities.
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Caregiving services can range from managing
personal finances and transporting for medical visits to providing
twenty-four-hour supervision and assisting with bathing, toileting, and
dressing so that their loved ones are not prematurely institutionalized and can
remain in their homes.

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The legislature further finds that nonpaid
family caregivers face many physical, emotional, and financial challenges and
often balance caregiving with work and other personal responsibilities.
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A 2021 national study found that, on average,
family caregivers spend twenty-six per cent of their income on caregiving
services; nearly eight in ten caregivers report having routine out-of-pocket
expenses related to caregiving; and that these out-of-pocket expenses average $7,242
per year.
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The legislature believes that
the demands on family caregivers are not isolated family issues and that the
State should assist in the delivery of meaningful support and solutions for
those that provide unpaid long-term care services in the State.

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Accordingly, the purpose of this Act is to
establish a nonrefundable tax credit for nonpaid family caregivers.

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SECTION 2.
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Chapter 235, Hawaii Revised Statutes, is amended by adding a new section
to be appropriately designated and to read as follows:

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"
�235-
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Family
caregiver tax credit.
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(a)
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Each eligible taxpayer subject to the tax imposed by this chapter may
claim a family caregiver tax credit against the taxpayer's individual net
income tax liability, if any, imposed by this chapter for the taxable year in
which the credit is properly claimed.

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(b)
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The family caregiver tax credit shall be
equal to the qualified expenses of the eligible taxpayer, up to a maximum of $3,000
in any taxable year; provided that married individuals who do not file a joint
tax return shall only be entitled to claim the tax credit to the extent that
they would have been entitled to claim the tax credit had they filed a joint
return.

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(c)
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An eligible taxpayer may claim the tax credit
for every taxable year or part thereof that the eligible taxpayer:

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(1)
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Provides
care to a care recipient during the taxable year;

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(2)
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Has
personally incurred uncompensated expenses directly related to the care of a
care recipient; and

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(3)
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Has
not claimed the care recipient as a dependent for the purpose of a tax
deduction in the same taxable year.

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(d)
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Only one eligible taxpayer per household may
claim a tax credit under this section for any care recipient cared for in a
taxable year.
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Only one tax credit under
this section shall be claimed by an eligible taxpayer in any one taxable year,
regardless of the number of care recipients receiving care from the eligible
taxpayer.

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(e)
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The director of taxation:

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(1)
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Shall
prepare any forms that may be necessary to claim a tax credit under this
section;

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(2)
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May
require the taxpayer to furnish reasonable information to ascertain the
validity of the claim for the tax credit made under this section, including a
letter from a licensed health care provider confirming that the care recipient
meets the criteria of the definition of that term in subsection (h); and

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(3)
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Shall
adopt rules pursuant to chapter 91 necessary to carry out this section.

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(f)
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The credit authorized by this section may not
be used to reduce the tax liability of the taxpayer to less than zero dollars.
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If the tax credit under this section exceeds
the taxpayer's net income tax liability, the excess of the credit over
liability shall not be carried over to subsequent years.
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All claims for the tax credit under this
section, including amended claims, shall be filed on or before the end of the
twelfth month following the close of the taxable year for which the credit may
be claimed.
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Failure to comply with the
foregoing provision shall constitute a waiver of the right to claim the credit.

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(g)
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The department of taxation shall submit a
report to the legislature no later than twenty days prior to the convening of
each regular session on the number of eligible taxpayers claiming the tax
credit and the total cost of the tax credit under this section to the State
during the past year.

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(h)
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For the purposes of this section:

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"Activities
of daily living" has the same meaning as defined in section 349-16.

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"Care
recipient" means an individual who:

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(1)
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Is
a citizen of the United States or a qualified alien; provided that for the
purposes of this paragraph, "qualified alien" means a lawfully
admitted permanent resident under the Immigration and Nationality Act;

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(2)
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Does
not reside in a long-term care facility, such as an intermediate care facility,
assisted living facility, skilled nursing facility, hospital, adult foster
home, community care foster family home, adult residential care home, expanded
adult residential care home, or developmental disabilities domiciliary home;
and

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(3)
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Has
impairments of at least one of the following:

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(A)
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Two activities of daily living;

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(B)
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Two instrumental activities of daily living;

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(C)
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One activity of daily living and one instrumental activity of
daily living; or

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(D)
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Substantive cognitive impairment requiring substantial
supervision because the individual behaves in a manner that poses a serious
health or safety hazard to the individual or another person.

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"Care
recipient" includes a person with a disability, as disability is defined
under section 515-2.

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"Eligible
taxpayer" means any relative of a care recipient who:

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(1)
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Has
a federal adjusted gross income of $75,000 or less, or $125,000 if filing a
joint tax return; and

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(2)
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Has
undertaken the care, custody, or physical assistance of the care recipient.

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"Instrumental
activity of daily living" has the same meaning as defined in section
349-16.

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"Licensed
health care provider" means a physician or an osteopathic physician
licensed under chapter 453, a physician assistant licensed under chapter 453,
or an advanced practice registered nurse licensed under chapter 457.

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"Qualified
expenses" means out-of-pocket expenses directly incurred by the eligible
taxpayer in providing care to a care recipient that have not been reimbursed,
credited, paid, or otherwise covered by another individual, organization,
provider, or government entity.
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"Qualified expenses" include but are not limited to:

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(1)
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The
improvement of or alteration to the eligible taxpayer's primary residence in
order to permit the care recipient to live in the residence and remain mobile,
safe, and independent, including entrance ramps, safety grab bars by toilets,
and the conversion of tubs to accessible showers;

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(2)
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The
purchase or lease of equipment and supplies, including but not limited to
durable medical equipment and portable commodes, necessary to assist a care
recipient in carrying out one or more activities of daily living; and

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(3)
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Other
expenses paid or incurred by the eligible taxpayer that assists the eligible
taxpayer in providing care to a care recipient, such as expenditures related
to:

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(A)
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Home care aides or chore workers;

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(B)
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Respite care;

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(C)
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Adult day care or adult day health center services;

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(D)
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Personal care attendants;

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(E)
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Transportation, including but not limited to paratransit service
for non-emergency medical transport;

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(F)
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Health care equipment; and

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(G)
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Assistive technology, including emergency alert systems and
voice activated medication dispensers or reminders.

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"Relative"
means a spouse, child, parent, sibling, legal guardian, reciprocal beneficiary
as defined in section 572C-3, partner as defined in section 572B-1, or any
other person who is related to a care recipient by blood, marriage, or adoption,
including a person who has a hanai or substantial familial relationship to the
care recipient.
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SECTION 3.
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There is appropriated out of the general revenues of the State of Hawaii
the sum of $3,100,000 or so much thereof as may be necessary for fiscal year
2026-2027 to be allocated as follows:

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(1)
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$100,000
for infrastructure development and implementation of the family caregiver tax
credit; and

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(2)
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$3,000,000
for the certification of claims for tax credits under the family caregiver tax
credit.

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The sum appropriated shall be expended by
the department of taxation for the purposes of this Act.

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SECTION 4.
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New statutory material is underscored.

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SECTION 5.
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This Act shall take effect upon its approval; provided that:

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(1)
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Section
2 shall apply to taxable years beginning after December 31, 2026; and

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(2)
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Section
3 shall take effect on July 1, 2026.

INTRODUCED
BY:

_____________________________

Report Title:

Kupuna
Caucus; DOTAX; Family Caregiver Tax Credit; Report; Appropriation

Description:

Establishes
a family caregiver tax credit for nonpaid family caregivers.
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Requires the Department of Taxation to submit
annual reports to the Legislature.
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Appropriates moneys.
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The tax
credit applies to taxable years beginning after 12/31/2026.

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