SB 123: RELATING TO TAXATION. | Digital Democracy

Current Status:

Failed

(2025-12-08: Carried over to 2026 Regular Session.)

Introduced

In Committee

First Chamber

In Committee

Second Chamber

Final Decking

Enacted

Version:

Eliminates the home mortgage interest deduction for second homes under Hawaii income tax law. Requires reports to the Legislature. (SD1)

Version:

SB123 SD1

THE SENATE	S.B. NO.	123
THIRTY-THIRD LEGISLATURE, 2025		S.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO TAXATION.

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

SECTION 1. The purpose of this Act is to eliminate the home mortgage interest deduction for second homes under Hawaii income tax law.

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)(4)(A)(i)(II) (definition of qualified residence for home mortgage interest deduction);

(5) Section 163(h)(4)(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. The department of budget and finance, in consultation with the department of taxation, shall submit a report on the administration of this Act to the legislature no later than twenty days prior to the convening of the regular sessions of 2026, 2027, 2028, 2029, and 2030.

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2024.

Report Title:

Department of Budget and Finance; Department of Taxation; Home Mortgage Interest Deduction; Income Tax; Reports

Description:

Eliminates the home mortgage interest deduction for second homes under Hawaii income tax law. Requires reports to the Legislature. (SD1)

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

SB123

THE SENATE	S.B. NO.	123
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII

A BILL FOR AN ACT

relating to taxation.

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

SECTION 1. The purpose of this Act is to eliminate the home mortgage interest deduction for second homes under Hawai‘i income tax law.

SECTION 2. Section 235-2.4, Hawaii Revised Statutes, is amended by amending subsection (j) to read as follows:

(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)(4)(A)(i)(II) (definition of qualified residence for home mortgage interest deduction);

(5) Section 163(h)(4)(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 2. The department of budget and finance, in consultation with the department of taxation, shall submit a report on the administration of this Act to the legislature no later than twenty days prior to the convening of the regular sessions of 2026, 2027, 2028, 2029, and 2030.

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, 2024.

INTRODUCED BY:	_____________________________

Report Title:

Department of Budget and Finance; Department of Taxation; Home Mortgage Interest Deduction; Income Tax; Reports

Description:

Eliminates the home mortgage interest deduction for second homes under Hawaii income tax law. Requires reports to the Legislature.

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

Date	Status
Dec 8, 2025	Carried over to 2026 Regular Session.
Feb 10, 2025	Report adopted; Passed Second Reading, as amended (SD 1) and referred to WAM.
Feb 10, 2025	Reported from HOU (Stand. Com. Rep. No. 146) with recommendation of passage on Second Reading, as amended (SD 1) and referral to WAM.
Jan 28, 2025	The committee(s) on HOU recommend(s) that the measure be PASSED, WITH AMENDMENTS. The votes in HOU were as follows: 4 Aye(s): Senator(s) Chang, Hashimoto, Aquino, Kanuha; Aye(s) with reservations: none ; 0 No(es): none; and 1 Excused: Senator(s) Fevella.
Jan 22, 2025	The committee(s) on HOU has scheduled a public hearing on 01-28-25 1:00PM; Conference Room 225 & Videoconference.
Jan 17, 2025	Referred to HOU, WAM.
Jan 15, 2025	Introduced and passed First Reading.
Jan 10, 2025	Pending Introduction.

Date	Description	Location	Votes
Jan 28, 2025	The committee(s) on HOU recommend(s) that the measure be PASSED, WITH AMENDMENTS	Senate Standing Committee on Housing	4 0 1 Passed

Key

Pro

Against

Did Not Vote

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.

* Testimony in a hearing

** Position recorded in bill analysis

*** Position recorded in written testimony

Organization	Position	Date
Hawaiʻi Association of REALTORS	** Against

* Testimony in a hearing

** Position recorded in bill analysis

*** Position recorded in written testimony

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STAND. COM. REP. NO. 146

Honolulu, Hawaii

RE: S.B. No. 123

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

Your Committee on Housing, to which was referred S.B. No. 123 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose and intent of this measure is to:

(1) Eliminate the home mortgage interest deduction for second homes under Hawaii income tax law; and

(2) Require reports to the Legislature.

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, Department of Budget and Finance, Tax Foundation of Hawaii, and Maui Chamber of Commerce.

Your Committee finds that the mortgage interest deduction allows homeowners who itemize deductions on their taxes to deduct mortgage interest attributable to a primary residence, second home debt, and interest paid on home equity debt. However, in light of the State's ongoing housing storage, your Committee finds that tax incentives should be directed toward helping residents with purchasing their first primary residence, rather than encouraging the wealthiest of residents to own second homes. Eliminating the mortgage interest deduction for second homes will help the State expand access to additional housing. Accordingly, this measure offers the potential for additional revenue generation and the collection of critical data to measure its effectiveness.

Your Committee notes the concerns raised in the Department of Taxation's testimony regarding the type of information to be collected and reported to the Legislature. According to its testimony, no reporting specifics are established in the measure and the Department would be unable to provide information such as any revenue gained as a result of eliminating the deduction for mortgage interest for second homes. Your Committee finds this issue merits further consideration and requests that subsequent committees consider specifying the content of the reports as this measure moves through the legislative process.

Your Committee has amended this measure by making technical, nonsubstantive amendments for the purposes of clarity and consistency.

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 S.B. No. 123, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 123, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Housing,

________________________________

STANLEY CHANG, Chair

Discussed in Hearing

1MIN

Senate Standing Committee on Housing

View Older Hearings

Authors shown for version:
SB123_SD1 (2/7/2025)