- Hawaii
What Do Therapists Need to Know About Taxes in Hawaii?
Hawaii’s unique tax environment — including a state general excise tax instead of sales tax — means therapists need to plan carefully. This guide walks you through setting up your practice, paying state taxes, and choosing the right structure to stay compliant and minimize surprises.
Who this guide is for
This guide is for:
- Licensed Hawaii therapists (LMHCs, LCSWs, psychologists, etc.)
- Solo or group private practices
- Clinicians offering in-person, telehealth, or hybrid services
- Therapists looking to reduce tax stress and stay compliant in Hawaii
Step 1: Pick the right structure for your practice
Your business structure affects how you’re taxed and how much admin work you take on.
Sole Proprietorship
- No registration required unless using a trade name
- Income taxed personally, including self-employment tax
- Simpler setup but no liability protection
PLLC (Professional LLC)
- Hawaii allows licensed professionals to form PLLCs
- Personal liability protection
- Default tax treatment is pass-through
- Can elect S Corp for federal tax savings
- Must register with the Department of Commerce and Consumer Affairs (DCCA)
S Corporation
- Helps reduce self-employment tax
- Requires payroll, bookkeeping, and separate tax filings
- Makes sense once your net income exceeds ~$75K
- Still pays Hawaii income tax and general excise tax (GET)
Professional Corporation (PC)
- Allowed in Hawaii
- Can elect S Corp status
- Typically used by multi-clinician practices or group owners
Step 2: Know your state tax obligations
State income tax
- Hawaii has a progressive income tax system — top rate is 11%
- Applies to all personal and pass-through business income
- File using Hawaii Form N-11 (resident) or N-15 (non-resident)
General Excise Tax (GET)
- Hawaii charges GET instead of sales tax — on gross receipts, not profit
- Most therapy services are taxable under GET (even if healthcare related)
- Rate: 4% statewide, plus 0.5% local surcharge in some counties
- File monthly, quarterly, or annually depending on income
- Must register for a GET license with the Department of Taxation
Annual report
- PLLCs and PCs must file annual reports with the DCCA
- Filing fee is $15–$20
- Due by end of registration anniversary quarter
Step 3: Pay taxes throughout the year — not just in April
Estimated taxes
- Required if you expect to owe $500+ to Hawaii or $1,000+ to the IRS
- Hawaii estimates due: April 20, June 20, Sept 20, Jan 20
- Use Form N-1 or pay online through Hawaii Tax Online
Self-employment tax
- 15.3% federal tax on net income (Social Security and Medicare)
- Applies to sole props and default PLLCs
- S Corp structure can help reduce this burden
Filing requirements
- Sole prop: Schedule C + Hawaii N-11
- PLLC: Annual report + GET + individual tax return
- S Corp: 1120-S + Hawaii N-35 + payroll + GET + annual report
Step 4: Track and claim your deductions
You still need to track deductions — even though GET is on gross receipts.
Deductible expenses for therapists
- Office space or home office
- Therapy software and tech platforms
- Malpractice insurance
- CEUs and supervision
- Licensing, renewals, and professional memberships
- Internet, phone, office supplies
- Marketing and directories
- Self-employed health insurance
- Retirement contributions
Step 5: When it’s time to consider an S Corp
If your net income is climbing past $75K, it’s time to evaluate the S Corp option.
S Corp
- Reduce self-employment tax
- Take a salary and distributions
- Still responsible for Hawaii GET on gross receipts
- Must run payroll and file separate returns
- CPA involvement is usually needed
Step 6: Common mistakes therapists make
- Not registering or filing for General Excise Tax
- Underestimating Hawaii’s income tax on pass-through income
- Thinking therapy services are exempt from GET
- Not separating business and personal bank accounts
- Failing to run payroll after electing S Corp
- Missing CEU and business deductions
Step 7: Our recommendations by income level
Net Income Range Suggested Action
Under $50K Sole prop or PLLC; file GET regularly; track deductions
$50K–$100K CConsider S Corp; start payroll; pay GET + income tax
Over $100K Full S Corp setup; quarterly CPA check-ins; maximize benefits
Disclaimer: This guide is for informational purposes only and does not constitute legal, tax, or financial advice. While we make every effort to keep the content accurate and up to date, state laws and regulations can change without notice. You should consult a licensed professional in your state before making any decisions based on this information. Leichter Accounting Services is not liable for any errors or omissions, or for any actions taken based on the contents of this guide.
Need help figuring this out?
We help Hawaii therapists stay compliant with GET, reduce self-employment tax, and stay organized without losing their minds over paperwork.
Book a consult or email us at david@leichtercpa.com