HAR § 18-235-54 — Exemptions

(a) Individual. In computing taxable income, individual taxpayers are allowed a deduction for the exemptions as provided in section 235-54, HRS. For taxable years after December 31, 1984, this deduction is determined as follows: (1) Ascertain the number of exemptions which the individual can lawfully claim under section 151, IRC, (allowance of deductions for personal exemptions); (2) Add an additional exemption if the taxpayer or the taxpayer’s spouse is sixty-five years of age or older within the taxable year; and (3) Multiply by $1,040. The exemption for a taxpayer or a taxpayer’s spouse who is blind, deaf, or totally disabled shall be as set forth in section 235- 54(c), HRS, and subsection (c). (b) Estate or trust. In computing taxable income, an estate or trust is allowed a deduction for the exemptions as provided in section 235-54(b), HRS, as follows: HRS §235-51 HRS §235-52 HRS §235-53 HRS §235-54 §18-235-54 (1) An estate is allowed a deduction of $400; (2) A trust which is required to distribute all of its income for the taxable year, pursuant to the terms of the trust instrument, is allowed a deduction of $200; and (3) All other trusts are allowed a deduction of $80. A trust which is required to distribute all of its income currently is allowed a deduction of $200, even though it also distributes amounts other than income in the taxable year and even though it may be required to make charitable contributions and, therefore, does not qualify as a simple trust under sections 651 and 652, IRC (trusts which distribute current income only). A trust for the payment of an annuity is allowed a deduction of $200 in a taxable year in which the amount of the annuity required to be paid equals or exceeds all the income of the trust for the taxable year. (c) Blind, deaf, or totally disabled person. In lieu of the exemptions provided by section 235-54, HRS, and subsection (a), a blind, deaf, or totally disabled person is allowed an exemption of $7,000 in computing taxable income. (1) Definition. For purposes of section 235-54, HRS, and this section, the terms “blind”, “deaf”, and “person totally disabled” shall be defined as set forth in section 235-1, HRS. (2) Burden of proof. A taxpayer who qualifies as blind, deaf, or totally disabled, pursuant to section 235-1, HRS, is entitled to claim the special exemption available under section 235- 54, HRS, and this section. To claim the special exemption, the taxpayer shall provide the department with sufficient proof of the disability as required under section 235-1, HRS. If the taxpayer does not provide sufficient evidence of the disability as required in section 235-1, HRS, the taxpayer may not claim the special exemption. The blind, deaf, or totally disabled taxpayer also may elect not to claim the special exemption. (3) Status determination date; reexamination. Qualification for the special exemption shall be determined as set forth in this subsection. The date establishing the determination of blindness, deafness, or total disability for these purposes shall be referred to as the “status determination date”. A blind, deaf, or person totally disabled shall be reexamined, as directed by the department, in order to maintain the blind, deaf, or totally disabled status and to continue to qualify for the special exemption. (4) Single taxpayer. In the case of a single person filing an individual tax return, blindness, deafness, or total disability is determined as of the close of the taxpayer’s taxable year. If the taxpayer qualifies as blind, deaf, or person totally disabled as set forth in this subsection, the taxpayer is entitled to take the special exemption of $7,000 as set forth in section 235-54(c), HRS. (5) Joint return of husband and wife. In the case of a joint return of a husband and wife, blindness, deafness, or total disability is determined as of the close of the taxable year of the spouse who qualifies for the special exemption. If both spouses qualify for the special exemption, they may take up to a total combined exemption of $14,000 for the taxable year. If only one spouse qualifies for the special exemption, the total combined exemption for the taxable year of both spouses shall be calculated by adding together the following: (A) For the spouse who qualifies as a blind, deaf, or person totally disabled, an exemption of $7,000; and (B) For the spouse who does not qualify as a blind, deaf, or person totally disabled, an exemption of $1,040 multiplied by 1 (if this spouse had not attained the age of sixty- five before the close of the taxable year), or $1,040 multiplied by 2 (if this spouse was at least sixty-five years old before the close of the taxable year). No additional exemptions shall be taken for dependents; the special exemption is available in lieu of any personal exemptions to which the taxpayer may be entitled. (6) Married person, filing separately; person qualifying for the special exemption. A married person filing separately who qualifies as blind, deaf, or totally disabled, by the close of the person’s taxable year is entitled to an exemption of $7,000; person not qualifying for the special exemption. In the case of a married person filing separately who does not qualify for the special exemption, but whose spouse is a blind, deaf, or person totally disabled, the amount of exemption allowed for the taxable year shall be determined as follows: $1,040 multiplied by the number of exemptions which the nonqualifying taxpayer may lawfully claim under section 151, IRC, (allowance of deductions for personal exemptions), for the taxpayer, the taxpayer’s spouse, and the taxpayer’s dependents. The taxpayer, however, shall not take additional exemptions with regard to the taxpayer’s spouse’s blindness, deafness, or total disability. (d) Short period, annualized income. If a taxpayer’s income is annualized to determine tax liability for a short period, as provided in section 443(b)(1), IRC, (returns for a period of less than 12 months), the personal exemptions set forth in section 235-54, HRS, and this section, shall be reduced to an amount which is proportionate to §18-235-55 the number of months in the short period as compared to twelve. Computing the proportionate exemption amount for a short period, resulting from conversion to or from a fifty-two to fifty-three week taxable year, shall be made as allowed by the director. If, however, a taxpayer’s income is annualized to determine tax liability for a short period due to a change in the taxpayer’s residency, the taxpayer may claim the entire personal exemption amount which the taxpayer is entitled to claim.