Business owners in Hawaii have a few business tax incentives they can take advantage of. If you run a business on one of the islands, make sure you know which of the below credits—if any—you’re eligible for.
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Hawaii business tax incentives
Motion Picture, Digital Media, and Film Production Income Tax Credit
Administered by the Hawaii Film Office, the Motion Picture, Digital Media, and Film Production Income Tax Credit incentivizes production companies to set their projects in Hawaii.
Production companies that produce qualified films, TV series, commercials, or digital media projects on Oahu can get an income tax credit equal to 22% of their qualified in-state spending. Production companies that set their projects on the neighboring islands (Big Island, Kauai, Lanai, Maui, Molokai) can get a credit equal to 27% of their spending.
To qualify for the credit, you need to register to do business in Hawaii, register with the Hawaii Film Office at least seven days ahead of starting principal photography, and meet the minimum in-state spending requirement of $100,000. You also need to make reasonable efforts to hire local talent and crew and make a financial or in-kind contribution to local film, TV, and digital media organizations.
Get more information on the credit and apply here.
Hawaii Tax Credit for Research Activities
The state Tax Credit for Research Activities—which is only available through December 2024—supports certain Hawaii businesses for investing in qualified research and development (R&D) activities.
To be eligible for the credit, you need to be a qualified high-technology business (QHTB), which means you need to conduct more than 50% of your activities in qualified research. Those qualified research activities include:
- Computer software development and design
- Biotechnology
- Performing arts products
- Sensor and optic technologies
- Ocean sciences
- Astronomy
- Non-fossil fuel energy-related technology
The credit amount equals the amount of federal tax credit from Form 6765 multiplied by the percentage of eligible research expenses attributable to activities conducted in Hawaii. To apply for the credit, fill out the form here.
Does your business qualify for the federal R&D tax credit? Gusto has all the information you need.
Enterprise Zone Tax Credits
Designed to help spur job creation and stimulate the economy, Hawaii’s Enterprise Zone program rewards businesses for hiring and retaining employees.
To qualify for the various credits, newly established businesses and businesses moving to designated enterprise zones (EZs) have to maintain at least a 10% increase in the number of new full-time employees hired every year for seven years.
Existing businesses already located in designated EZs need to maintain at least a 10% increase in the number of new full-time employees hired every year for the first three years; for years four through seven, they have to increase the full-time employee number by 15% a year.
To be eligible for the credit, you also need at least 51% of your annual gross income to come from one or more of the following activities:
- Agricultural production or processing
- Manufacturing
- Wholesaling/Distribution
- Aviation or maritime repair or maintenance
- Telecommunications switching and delivery systems
- Information technology design and production
- Medical research and clinical trials
- For-profit training programs in international business management or environmental remediation
- Biotechnology research, development, production, or sales
- Repair or maintenance of assisted technology equipment
- Certain types of call centers
- Wind energy producers
If you receive the credit, you can take advantage of the following benefits:
- 100% exemption from the state’s general excise tax (GET) for up to seven consecutive years
- 80% non-refundable state income tax credit for the first year (the credit then goes down 10% a year for the next six years)
- A tax credit equal to 80% of annual unemployment insurance premiums for the first year (the credit then goes down 10% a year for the next six years)
Plus, certain counties also offer additional EZ benefits on top of the state credits and GET exemptions. Honolulu County, for example, offers a two-year exemption from any increase in property taxes.
You can learn more about the EZ program and apply here.
Opportunity Zone Program
Hawaii’s Opportunity Zone Program rewards investors for reinvesting their realized capital gains into Opportunity Funds, which help support lower-income communities across Hawaii.
Qualified investors can get temporary tax deferrals on capital gains taxes, an increase in the capital gains basis, and a permanent exclusion from taxable income of capital gains from the sale of certain investments in Opportunity Zones.
Learn more about the program here.
Renewable Energy Technologies Income Tax Credit (RETITC)
The Renewable Energy Technologies Income Tax Credit (RETITC) is a state tax credit available to individuals and businesses that invest in alternative energy systems.
Companies can get a credit for up to 35% of the total cost of a solar PV, solar space heater, or solar thermal water heating system (capped at $500,000), plus up to 20% of the cost of a wind-powered energy system (also capped at $500,000).
Learn how to claim the credit here.
Investing in alternative energy goes a long way toward improving your business’s environmental sustainability. Here are five other ways to reduce your operation’s carbon footprint.
Hawaii city and county tax credits
Many counties across Hawaii have their own business incentive programs for local operations. Honolulu, for example, has a Real Property Tax Exemption for Alternative Energy Improvements.
Search for your county website here to look for business incentive programs near you.
How to finance your business in Hawaii
Doing business in Hawaii can be tough, but fortunately, the state has financing solutions for businesses of every size and stage. Check out Gusto’s guide to grants and loans throughout the Hawaiian islands.
Want even more resources? Find out everything you need to know about Hawaii business taxes and Hawaii hiring regulations.
