SB123 amends Hawaii income tax law to eliminate the home mortgage interest deduction for second homes. The bill’s stated purpose is to remove the deduction for interest on a qualified residence that is not the taxpayer’s primary home, while leaving the broader structure of Hawaii’s conformity to Internal Revenue Code section 163 in place except for the specified exceptions.
The measure also requires the Department of Budget and Finance, in consultation with the Department of Taxation, to report to the Legislature on the administration of the act annually before the 2026 through 2030 regular sessions. The bill would apply to taxable years beginning after December 31, 2024, meaning it is intended to affect returns filed for the 2025 tax year and later.
Impact
SB123 would amend section 235-2.4 of the Hawaii Revised Statutes, which governs the state’s conformity to federal interest-deduction rules for income tax purposes. The bill specifically removes the operative effect of the federal provision defining a qualified residence for the home mortgage interest deduction, thereby disallowing the deduction for second homes under Hawaii law. Taxpayers with second-home mortgage interest would lose a state income tax benefit, while the Department of Taxation and Department of Budget and Finance would take on reporting obligations to the Legislature on implementation.
Sentiment
The available voting history suggests the bill received favorable initial committee support, passing the Senate Housing committee 4-0 with amendments. No committee transcript is available, so there is no recorded debate to indicate broader public or legislative sentiment. Based on the vote, the measure appears to have been viewed positively at least in committee, though the amendment action suggests some refinement of the proposal during consideration.
Contention
The main policy issue is the elimination of a tax benefit for second-home owners, which may be viewed as a revenue-raising or housing-prioritization measure by supporters and as a tax increase on property owners by opponents. The bill’s focus on second homes, rather than primary residences, is likely the central point of contention because it targets a specific class of taxpayers and could affect vacation-home owners, higher-income households, and real estate interests. The reporting requirement may also reflect concern about monitoring administrative and fiscal effects after enactment.
Property: recording; marketable record title act; revise. Amends title & secs. 1, 1a, 2, 3, 4, 5, 6 & 8 of 1945 PA 200 (MCL 565.101 et seq.) & adds sec. 5a.