HB 1729: Second Home Mortgage Interest Deduction; Income Tax
- Session Year: 2025-2026
- House: House
- Latest Version Date: 2026-02-18
Current Status:
Failed
(2026-02-19: Passed Second Reading as amended in HD 1 and referred to the committee(s) on FIN with Representative(s) Gedeon, Souza voting aye with reservations; Representative(s) Cochran, Garcia, Muraoka, Pierick voting no (4) and none excused (0).)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Final Decking
Enacted
What does this bill do?
The bill removes the state income tax deduction for mortgage interest on second homes. It affects taxpayers who own a second or vacation home in Hawaii by preventing them from deducting mortgage interest for that property on their state tax returns.
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
Disallows the home mortgage interest deduction for second homes under state income tax law. Effective 7/1/3000. (HD1)
Disallows the home mortgage interest deduction for second homes under state income tax law.
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
1729 |
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THIRTY-THIRD LEGISLATURE, 2026 |
H.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO TAXATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the State faces sustained pressure on housing affordability and availability. Tax preferences that subsidize the acquisition or carrying costs of second homes can increase demand for properties that are not used as a taxpayer's principal residence. The mortgage interest deduction for second homes provides such a preference by reducing the after-tax cost of owning a second home, even when that home is used only intermittently for personal purposes.
The legislature further finds that this preference does not advance the core public purposes of the State's income tax system, such as equity, efficiency, and simplicity, and may work at cross-purposes with the State's housing goals by encouraging the retention or purchase of homes that are not primary residences. Eliminating the deduction for interest attributable to indebtedness secured by a second home will better align the State's tax code with the State's housing policy objectives, narrow a nonessential tax expenditure, and allow resources to be redirected by the legislature toward higher-priority needs, including housing production and infrastructure that support new homes.
Accordingly, the purpose of this Act is to amend the state income tax law to disallow the mortgage interest deduction for second homes, as defined by reference to the federal Internal Revenue Code and as further specified in this Act.
SECTION 2. Section 235-2.4, Hawaii Revised Statutes, is amended by amending subsection (j) to read as follows:
"(j) Section 163 (with respect to interest) of the Internal Revenue Code shall be operative for the purposes of this chapter, except that the following provisions shall not be operative for the purposes of this chapter:
(1) Section 163(d)(4)(B) (defining net investment income to exclude dividends);
(2) Section 163(e)(5)(F) (suspension of applicable high-yield discount obligation (AHYDO) rules);
(3) Section
163(h)(3)(F) (limiting mortgage interest); [and]
(4) Section 163(h)(5)(A)(i)(II) (definition of qualified residence for home mortgage interest deduction);
(5) Section 163(h)(5)(A)(ii)(II) (treatment of home mortgage interest deduction for married individuals filing separately); and
[(4)] (6) Section 163(i)(1) as it applies to
debt instruments issued after January 1, 2010 (defining AHYDO)."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect on July 1, 3000, and shall apply to taxable years beginning after December 31, 2025.
Report Title:
Second Home Mortgage Interest Deduction; Income Tax
Description:
Disallows the home mortgage interest deduction for second homes under state income tax law. Effective 7/1/3000. (HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
1729 |
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THIRTY-THIRD LEGISLATURE, 2026 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to taxation.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the State faces sustained pressure on housing affordability and availability. Tax preferences that subsidize the acquisition or carrying costs of second homes can increase demand for properties that are not used as a taxpayer's principal residence. The mortgage interest deduction for second homes provides such a preference by reducing the after-tax cost of owning a second home, even when that home is used only intermittently for personal purposes.
The legislature further finds that this preference does not advance the core public purposes of the State's income tax system, such as equity, efficiency, and simplicity, and may work at cross-purposes with the State's housing goals by encouraging the retention or purchase of homes that are not primary residences. Eliminating the deduction for interest attributable to indebtedness secured by a second home will better align the State's tax code with the State's housing policy objectives, narrow a nonessential tax expenditure, and allow resources to be redirected by the legislature toward higher-priority needs, including housing production and infrastructure that support new homes.
Accordingly, the purpose of this Act is to amend the state income tax law to disallow the mortgage interest deduction for second homes, as defined by reference to the federal Internal Revenue Code and as further specified in this Act.
SECTION 2. Section 235-2.4, Hawaii Revised Statutes, is amended by amending subsection (j) to read as follows:
"(j) Section 163 (with respect to interest) of the Internal Revenue Code shall be operative for the purposes of this chapter, except that the following provisions shall not be operative for the purposes of this chapter:
(1) Section 163(d)(4)(B) (defining net investment income to exclude dividends);
(2) Section 163(e)(5)(F) (suspension of applicable high-yield discount obligation (AHYDO) rules);
(3) Section
163(h)(3)(F) (limiting mortgage interest); [and]
(4) Section 163(h)(5)(A)(i)(II) (definition of qualified residence for home mortgage interest deduction);
(5) Section 163(h)(5)(A)(ii)(II) (treatment of home mortgage interest deduction for married individuals filing separately); and
[(4)] (6) Section 163(i)(1) as it applies to
debt instruments issued after January 1, 2010 (defining AHYDO)."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2025.
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INTRODUCED BY: |
_____________________________ |
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Report Title:
Second Home Mortgage Interest Deduction; Income Tax
Description:
Disallows the home mortgage interest deduction for second homes under state income tax law.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
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Date
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Status
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| Feb 19, 2026 | Passed Second Reading as amended in HD 1 and referred to the committee(s) on FIN with Representative(s) Gedeon, Souza voting aye with reservations; Representative(s) Cochran, Garcia, Muraoka, Pierick voting no (4) and none excused (0). |
| Feb 19, 2026 | Reported from HSG (Stand. Com. Rep. No. 559-26) as amended in HD 1, recommending passage on Second Reading and referral to FIN. |
| Feb 18, 2026 | The committee on HSG recommend that the measure be PASSED, WITH AMENDMENTS. The votes were as follows: 9 Ayes: Representative(s) Evslin, Miyake, Grandinetti, Kila, Kitagawa, La Chica; Ayes with reservations: Representative(s) Cochran, Muraoka, Pierick; Noes: none; and Excused: none. |
| Feb 12, 2026 | Bill scheduled to be heard by HSG on Wednesday, 02-18-26 10:00AM in House conference room 430 VIA VIDEOCONFERENCE. |
| Feb 11, 2026 | This measure has been deleted from the meeting scheduled on Friday 02-13-26 9:00AM in conference room 430 VIA VIDEOCONFERENCE. |
| Feb 10, 2026 | Bill scheduled to be heard by HSG on Friday, 02-13-26 9:00AM in House conference room 430 VIA VIDEOCONFERENCE. |
| Jan 26, 2026 | Referred to HSG, FIN, referral sheet 1 |
| Jan 21, 2026 | Introduced and Pass First Reading. |
| Jan 20, 2026 | Prefiled. |
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Date
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Description
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Location
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Votes
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| Feb 18, 2026 | The committee on HSG recommend that the measure be PASSED, WITH AMENDMENTS | House Standing Committee on Housing |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
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Organization
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Position
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Date
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| Hawai‘i Association of REALTORS® | *** Against | Feb 17, 2026 |
| Housing Hawaiʻi's Future | ** Support | |
| Housing Hawai‘i’s Future | *** Support | Feb 17, 2026 |
STAND. COM. REP. NO. 559-26
Honolulu, Hawaii
, 2026
RE: H.B. No. 1729
H.D. 1
Honorable Nadine K. Nakamura
Speaker, House of Representatives
Thirty-Third State Legislature
Regular Session of 2026
State of Hawaii
Madame:
Your Committee on Housing, to which was referred H.B. No. 1729 entitled:
"A BILL FOR AN ACT RELATING TO TAXATION,"
begs leave to report as follows:
Your Committee received testimony in support of this measure from Housing Hawaiʻi's Future and one individual. Your Committee received testimony in opposition to this measure from the Hawaiʻi Association of REALTORS. Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.
Your Committee finds that Hawaii continues to face severe pressure on housing affordability and availability, and that tax preferences benefiting second home ownership can exacerbate these challenges by incentivizing the purchase and retention of properties not used as primary residences. These tax preferences reduce the after-tax cost of owning additional homes and do not advance core public policy goals of equity or efficiency, while potentially worsening competition for limited housing stock. Your Committee believes that eliminating the mortgage interest deduction for second homes will better align the State's income tax code with housing objectives and allow resources to be redirected to higher priority needs such as housing production and infrastructure.
Your Committee has amended this measure by changing the effective date to July 1, 3000, to encourage further discussion.
As affirmed by the record of votes of the members of your Committee on Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1729, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1729, H.D. 1, and be referred to your Committee on Finance.
Respectfully submitted on behalf of the members of the Committee on Housing,
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____________________________ LUKE A. EVSLIN, Chair |
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Date
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Testimony PDF
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| Feb 17, 2026 | HB1729_TESTIMONY_HSG_02-18-26_.PDF |
Discussed in Hearing
2MIN
House Standing Committee on Housing
1MIN
