HB707 would expand Hawaii’s tax treatment of education savings by creating a new state income tax deduction for contributions to both Hawaii’s 529 college savings accounts and the Hawaii ABLE savings program. The deduction would be capped at $5,000 per year for single filers and married people filing separately, and $10,000 per year for joint filers, heads of household, and surviving spouses. The bill also requires recapture of amounts withdrawn for non-qualified expenses and authorizes the Department of Taxation to create forms, request proof, and adopt rules to administer the deduction.
The bill further updates Hawaii law to conform to federal changes allowing 529 plan funds to be used for K-12 educational expenses. It amends the state’s conformity provision for section 529 of the Internal Revenue Code and revises the college savings program statute to reflect that families may use the program to save for college and other education-related expenses, including elementary and secondary schooling as permitted under federal law. The measure is intended to support higher education savings and broaden the usefulness of the state’s college savings program.
Impact
HB707 would amend chapter 235, Hawaii Revised Statutes, to add a new income tax deduction for contributions to qualified 529 accounts and ABLE accounts, and it would amend chapters 235 and 256 to align Hawaii law more closely with federal 529 rules. The bill would affect taxpayers who contribute to these accounts, the Department of Taxation, and the administration of Hawaii’s college savings program and Hawaii ABLE savings program. It would also expand the state’s conformity with federal tax law by opting into the federal rule allowing 529 funds for K-12 expenses.
Sentiment
No committee transcripts or recorded votes were provided, so there is no direct evidence of debate or opposition in the available record. Based on the bill text, the measure appears generally supportive of education savings, family financial planning, and disability-related savings, suggesting a favorable policy orientation. The inclusion of both college savings and ABLE accounts indicates an effort to appeal to a broad set of beneficiaries.
Contention
The main policy issues likely concern the fiscal cost of the new deduction, the decision to conform to federal K-12 529 provisions, and whether the state should expand tax preferences for education savings accounts. Another possible point of discussion is the inclusion of ABLE accounts in the deduction, which benefits individuals with disabilities and their families and may raise questions about program scope and revenue impact. The bill’s recapture provision for non-qualified withdrawals suggests an effort to limit abuse, but administration and verification requirements could still be a point of concern for tax officials.