Hawaii allows certain resident taxpayers to claim a credit for net income taxes paid to another state or foreign country on income that is also subject to Hawaii income tax. The credit is claimed on Form N-309, Credit for Income Taxes Paid to Another State or Foreign Country, and is subject to the limitations provided by Hawaii law.
Key Rules and Restrictions
- Non-duplication Rule: If you claim the credit for income taxes paid to another state or foreign country, you cannot also claim those same taxes as an itemized deduction. If you deduct those taxes on your Hawaii return, you must reduce your deduction by the amount used to claim the credit.
- Reporting Location: Complete Form N-309 to compute the allowable credit and carry the credit to the appropriate credit line on your Hawaii income tax return, as instructed.
- Eligible Taxes: The credit applies only to qualifying net income taxes paid to another state or foreign country on income that is also taxed by Hawaii. It does not apply to property taxes, sales taxes, or other non-income taxes.
Tax Rule Reference
- The credit is allowed under Chapter 235, Hawaii Revised Statutes (HRS). The eligibility requirements, limitations, and computation are explained in the Form N-11 Instructions and Form N-309 instructions.
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Disclaimer: Always verify details with the most current Federal or State Department of Revenue Forms and Instructions. For complex situations, consult a CPA or tax attorney.