Hawaii business owners are advised to gear up for changes as the 2026 tax year approaches, bringing with it a mix of new, revived, and modified tax provisions. These changes, stemming from the recently enacted "One Big Beautiful Bill," demand attention from entrepreneurs, investors, and professionals across the islands.
One of the most important changes is the reintroduction of bonus depreciation, which allows businesses to deduct the full amount of an asset’s depreciation within the first year of purchase, instead of spreading it out over the asset's depreciable life. As detailed by the Carr, Riggs & Ingram, this applies to assets placed in service on or after January 19, 2025, giving businesses a significant opportunity to offset property purchase and construction costs. Businesses that produce goods will be eligible for this deduction on the full cost of production property in the year it’s constructed.
Furthermore, the Qualified Business Income (QBI) deduction under Section 199A, originally set to expire, has been made permanent. Bankrate notes that the new law also adjusts certain provisions around the deduction’s limitations, including an increased deduction threshold amount for single and married filers. The new changes extend to the phase-in limitations for some, the minimum deduction amount, and the definition of QBI.
In addition to the deductions mentioned above, the OBBB Act has made changes to research and development (R&D) tax credits. Small businesses can retroactively expense and deduct domestic R&D costs back to January 1, 2022, and do so over one or two years instead of the previous 15 years. However, any foreign R&D will have to be amortized over 15 years as was dictated by the previous law.
With these changes on the horizon. Aprio recommends that Hawaii businesses should consult with their tax advisors to understand how the new provisions affect them and take advantage of the changes to optimize them. Staying informed and proactively adjusting tax strategies will be key, as 2026 approaches and these changes become effective.
