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According to the City & Country of Honolulu Department of Budget and Fiscal Services, Real Property Assessment Division, the real property tax is a major revenue source for police, fire protection, emergency services, water safety, parks, refuse, and other public services on the island of O‘ahu.
The residential real estate tax on O‘ahu, in which the whole island is known as Honolulu County, is classified into ten classes, as of July 1, 2022:
Property tax differs according to islands or the island’s governing county. Maui, Kaua‘i, and Hawai‘i counties have different real property tax rates.
If you live in a home or own a home that rents to other people on O‘ahu, you will typically fall into one of the following four classes.
This July 1, 2022 through June 30, 2023 (fiscal year 2022) rate applies to homes where the owner lives as their primary residence and to homes with an assessed value of less than $1,000,000.
A homeowner's exemption can be claimed if the home is the owner’s primary residence. This exemption gives the 0.35% property tax rate whether the home is worth $2,000,000 or $350,000 – and also gives a sizable exemption amount:
You may prove that the home is your primary residence by filling out a form and showing evidence that you are registered to vote in Honolulu, file an income tax return as a State of Hawai‘i resident, or occupy the home 270 days or more each calendar year.
An example of the Honolulu Residential property tax rate:
A 45-year-old owner lives in a Mānoa property with an assessed value of $1,600,000. According to his age, he has a $100,000 exemption, so his estimated yearly taxes are $5,250. (($1,600,000-$100,000) x 0.0035)
The Residential A Honolulu Property Tax Rate applies to properties where an owner doesn’t claim the home exemption and the total assessed value is more than $1,000,000.
An example of the Honolulu Residential A property tax rate:
A 50-year-old woman has a $1,600,000 property as her second home on the North Shore of O‘ahu. Since this is her second home, she does not have an exemption. The estimated annual taxes up to $1,000,000 are $4,500 ($1,000,000 x 0.0045), and the yearly property taxes above $1,000,000 are $6,300 ($600,000 x 0.0105). Therefore the total taxes for her second property are $10,800 per year ($6,300 + $4,500).
This tax is imposed on zoned hotels and resorts as well as transient vacation units. Prior to fiscal year 2020, the Hotel and Resort tax might have been imposed on all short-term vacation rentals, such rooms rented on Airbnbs, but starting July 1, 2020, transient vacation units will be in this existing hotel-resort tax class while bed-and-breakfast establishments will have their own tax class (Class J). If you are not using a Hotel & Resort zoned condo as a hotel, you can apply to have your property reclassified to residential.
An example of the Hotel & Resort property tax rate:
A couple owns a $1,600,000 tax-assessed property in a Waikīkī condo and rents it out every week to visitors. The estimated annual taxes are $21,264 ($1,600,000 x 0.0139).
This new property tax classification was created in December 2019 by Mayor Kirk Caldwell.
Bed and breakfasts are defined as rentals of less than 30 days where the homeowner or another operator is present during the stay. A typical B&B might be when someone has a room rental on Airbnb in their own home where they live. Transient vacation rentals (TVRs) are defined as “unhosted” or “whole home” rentals of less than 30 days, where an owner or operator is not present; TVRs are taxed in the hotel & resort class at 1.39%.
It is expected that the Department of Planning and Permitting will soon allow up to 1,700 new rentals on O‘ahu; however as of April 6, 2021, the registration process has been placed on hold due to potential complications. Read more about short term vacation rentals on O‘ahu and the other islands here. This new bed and breakfast tax rate will be a part of the City and County of Honolulu’s new clarifications and regulations concerning short-term vacation rentals, but only time will tell when more people will be charged this special rate.
“This next phase allows 1,700 hosted short-term vacation rental units to be registered and permitted starting in October 2020,” Caldwell said in a press conference in December 2019. “It’s only fair that owners who operate their home as short-term vacation rentals pay a higher real property tax rate than the residential category. We must not forget that those who are offering their homes as short-term vacation rentals are operating a business in our residential neighborhoods.”
An example of the Bed and Breakfast property tax rate: A family owns a $900,000 tax-assessed property in Kailua. They were lucky to be one of the permitted homes to rent a short-term vacation rental to visitors. They now rent out a room in their house on Airbnb to typically single travelers. The estimated annual taxes are $5,850 ($900,000 x 0.0065).
Before they were classified as a Bed and Breakfast property, they were paying the residential property tax, which was $3,150. Therefore, they are now paying $2,700 more annually in taxes since they rent a room on Airbnb and are classified as a legal Bed and Breakfast property.
In addition to these four residential Honolulu property tax rates, there are a number of other O‘ahu property tax rates:
How is the assessed value of my Hawai‘i home determined? To start, the tax assessed value of a home is different from the price a buyer will actually pay for it. To continue, no one typically visits your home to determine its assessed value.
Instead, an appraiser from the Honolulu tax office will typically analyze five comparable properties sold prior to July 1 of that tax year. On October 1, the assessed value from the appraiser will be used to calculate property taxes due the following fiscal year (July 1 to June 30).
For a newly constructed home or condo without a recorded sale, the appraiser from the Honolulu Real Property Assessment Division will calculate building costs, typically if the condo building project is less than 75% complete. If the project is 95% complete and comparable sales are available from a similar building, then the appraiser may use those comparable sales to determine an appraised value.
Assessed values can be contested – but be sure you have recently sold data to back up a claim. Properties listed for sale and market swings do not affect appraised home values. Evidence expedites appeals and includes comparable fee simple market sales, contractor estimates to repair certain items, and other evidence indicating that the assessed value exceeds the fee simple market value by more than 10 percent. Appeals can be filed from December 15, 2022, to January 15, 2023.
In Honolulu County, on the island of O‘ahu, taxes are due in two equal installments throughout the fiscal year (July 1 to June 30).
The first installment is due on August 20 (includes taxes from July 1 to December 31), and this bill will be mailed in July. The second installment is due on February 20 (includes taxes from January 1 to June 30), and this bill is mailed in January.
If August 20 or February 20 is a holiday, Saturday, or Sunday, then you have until the next business day to pay. Also, a property owner may pay for the entire year at the first property tax bill; you don’t have to wait to pay the amount in the February 20 bill.
There are four ways to pay your taxes to Honolulu County:
Make sure you pay on time, as interest at a rate of 1% is applied for each month of delinquent taxes. Honolulu City & County may also charge additional penalties.
In addition to the homeowner’s exemption, the City & County of Honolulu offered a real property tax credit to property owners who meet certain requirements:
The tax credit is the difference between the assessed real property tax on the property and 3 percent of the title owners’ gross income.
An example of someone who qualified for the real property tax credit: Mr. and Mrs. Aloha have a total income of $25,000 for 2021. Multiplying their total income by 3 percent = $750. Their 2022-2023 tax amount was $2,500 - $750 = They will receive $1,750 as a tax credit for tax year 2022-2023.
To apply for the real property tax credit, applications must have been received by September 30, 2022. It is unknown if the City and County of Honolulu will renew this tax credit, but many homeowners will be thankful to receive the credit this tax year, especially as people recover from the COVID-19 pandemic.
If you are a new homeowner living on the property, assure you file your tax exemption. Also, note address changes may take up to four months. The Honolulu Tax Department can be reached at 808-768-3980 to update tax bill mailing addresses.
Homeowners can also conveniently track their property taxes online. Honolulu's Real Property Tax helps to assure our City & County roads, parks, and other public services are available – and it’s nice to know the paradise tax on property is relatively low compared to the Mainland.
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