If you own rental property in Hawai’i, you are required to pay certain taxes. These taxes vary depending on which island you own real estate on. This article is an overview of the taxes you have to pay if you own rental property on O’ahu. Please note, the taxes you pay will vary depending on whether the property isoperated as a long-term or short-term rental. Also, if you are using a full service property management company, the company may collect and pay these taxes on your behalf.
A client’s 2 BR vacationrental at Waikiki Sunset. Click photo toreserve or here for video tour
General Excise Tax (GET): 4.5%
Rather than having a sales tax, Hawaii has a GET that is assessed on all business activity. For a rental property on O’ahu, GET is currently 4.5% and needs to be paid on gross rental income and can be passed on to the tenant. It is important that you pay this tax according to your required filing frequency. Depending on your tax liability, taxes will be paid monthly, quarterly or semi-annually. You are required to file (Form G-45) and pay the taxes no later than the 20th day of the month following the close of the filing period. You are also required to file an annual return (Form G-49). This is due on the 20th day of the fourth month following the close of the prior taxable year. For most people, G-49 needs to be filed no later than April 20th of the following year.
If a property is used as a “transient” accommodation (short-term rental), you will be required to pay the TAT. The State of Hawai’i defines “transient” accommodation as:
“A transient accommodation is a room, apartment, house, condominium, beach house, hotel room, suite, or similar living accommodation rented to a transient person for less than 180 consecutive days.”
The TAT is levied on gross rental or gross rental proceeds, which are any amounts received by an operator in cash, goods, or services for renting a transient accommodation without any deductions for costs. If you charge guests a cleaning fee, this fee is considered income and needs to be included into your TAT calculations. TAT needs to be paid in the same timeframe as your GET payments.
A client’s 1 BR vacationrental at Ilikai. Click photo toreserve or here for video tour
Is Income Ever Exempt From TAT Taxes?
There are situations in which you may not be required to pay TAT taxes in Hawaii. If your guests meet the following qualifications, you may be exempt from TAT:
Low-income renters receiving rental subsistence from the state or federal governments and whose rental periods are for durations shorter than 60 days.
Living accommodations for military personnel on permanent duty assignment to Hawaii, including military persons who receive a temporary lodging allowance while seeking accommodations in Hawaii or while awaiting reassignment outside Hawaii.
Lodging provided by nonprofit corporations or associations organized for religious, charitable, or educational purpose.
Accommodations furnished to foreign diplomats and consular officials who are holding cards issued or authorized by the United States Department of State granting them an exemption from state taxes.
Learn More About Transient Accommodation Tax (TAT)
To learn more about the TAT and forms you need to file to open an account as well as pay the tax, please click here:State of Hawai’i Intro to TAT
A client’s 1 BR vacationrental at Waikiki Banyan. Click photo toreserve or here for video tour
O’ahu Transient Accommodation Tax (OTAT): 3%
The O’ahu Transient Accommodation Tax (OTAT) is currently 3%. OTAT is imposed in addition to the TAT. Taxpayers who are registered with the State and have a valid State TAT number will be deemed registered for OTAT. Taxpayers subject to the OTAT do not need to register separately with the City.
Operators must display their TAT registration certificate in each room, apartment, or other transient accommodation unit being rented out. Instead of posting the certificate, you may post a notice informing the guest or tenant where the certificate may be inspected.
An out-of-state operator is required to have a local individual or business entity on the island to assist the tenant if necessary. You must provide the name, phone number and email address of the local contact in the same place that the registration certificate or notice is posted.
There is no statute of limitations for GET or TAT. Thus, it is very important you make the appropriate payments in a timely manner.
This information is simply provided as an overview of the taxes applicable to owning investment real estate on O’ahu. Please note that this information is subject to change and that I am not a tax advisor. It is strongly urged that you consult a qualified tax professional prior to acquiring investment property in Hawai’i in order to get the most current tax information and how it may apply to you.
Looking for an investmentproperty in Hawai’i? Simply call me directly at 808 354-5772 or click here.I’m hereto serve you andlook forward to helping you achieve your real estate goals.
You can email me atinquiry@hawaiilife.comor via phone at (808) 370-3848.
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The GET (including a county surcharge if applicable) and the TAT are imposed on you as the operator of the transient accommodation. You are responsible for paying these taxes, including any interest and penalty that may be assessed if a payment is not made or is late.
The GET rate on your gross rental income is 4% (plus the county surcharge, if applicable). If you are subleasing real property, you may claim a deduction of up to 87.5% (0.875) of your gross rental income so that the GET rate on subleases would be the equivalent of 0.5%. See Forms G-71 and G-72 for more information.
The OTAT is a tax levied at a rate of 3% on the gross rental or gross rental proceeds derived from furnishing transient accommodations, on the fair market rental value of a time share vacation unit, and on the gross rental proceeds received by transient Page 3 3 accommodations brokers, travel agents, and tour packagers ...
Presently, a qualified filer with a Hawaiʻi Adjusted Gross Income (AGI) under $30,000 who has spent at least $1,000 on rent can receive a refundable tax credit of $50 per qualified exemption.
Complete Form BB-1, State of Hawaii Basic Business Application, to register for both the GET and the TAT. The registration fee for the GET is $20. The registration fee for the TAT is $5 if you have 1 to 5 transient accommodation units and $15 if you have 6 or more units.
The new online filing and payment portal effective March 1, 2023 is https://otatpay.honolulu.gov. Credit, debit, and Automated Clearing House (ACH) payments are accepted. A 3% convenience fee will be applied to payments made by debit or credit cards. No fees will be assessed for payments made via ACH.
What is the long-term rental exemption? It is a real property exemption of up to $200,000 on a parcel that is occupied as a long-term rental for twelve (12) consecutive months or longer to the same tenant. The exemption will be effective January 1, 2022. 2.
It is expressed as a percentage of the property's assessed value and can be calculated using a Hawaii property tax calculator. For instance, in Honolulu County, residential properties have a tax rate of $3.50 per $1,000 of assessed value, while commercial properties have a tax rate of $12.40 per $1,000.
A Hawaii Nonresident is an individual that is in Hawaii temporarily and whose permanent domicile is not Hawaii. A Part-Year Resident of Hawaii is an individual that was considered a resident for part of the year and a nonresident for the other part of the year.
Frequently Asked Questions: Effective Nov 1, 2021, Maui County has implemented its Transient Accommodations Tax of 3%. This new MCTAT is in addition to the State of Hawaii TAT of 10.25% and GET of 4.1666%. TAT, MCTAT, and GET total 17.416%
On December 8, 2021, Hawai'i County Council passed Ordinance No. 21-89, Bill No. 81 (2021), Draft 2 establishing a rate of 3 percent on all gross rental, gross rental proceeds, and fair market rental value considered taxable under the definitions of Section 237D-1, Hawai`i Revised Statutes (HRS).
Similar to the rest of the US market, investors must pay income tax on the rental income - or Airbnb revenue - that they generate through their vacation rental property. The GET rate for Airbnb businesses is 4% in the State of Hawaii. Meanwhile, the TAT rate is 10.25% of gross rental proceeds.
Self-Manage the Property: In the State of Hawaii, a real estate license is required to sell, buy, lease, and manage real property. The law provides an exception for individuals, and an individual can sell, buy, lease, and manage his/her own property without a real estate license.
Rental income is any payment you receive for the use or occupation of property. Expenses of renting property can be deducted from your gross rental income. You generally deduct your rental expenses in the year you pay them.
On December 8, 2021, Hawai'i County Council passed Ordinance No. 21-89, Bill No. 81 (2021), Draft 2 establishing a rate of 3 percent on all gross rental, gross rental proceeds, and fair market rental value considered taxable under the definitions of Section 237D-1, Hawai`i Revised Statutes (HRS).
What You Need To Know About Hawaii State Taxes. The state of Hawaii requires you to pay taxes if you are a resident or nonresident and receive income from a Hawaii source. The state income tax rates range from 1.4% to 11%, and the Aloha State doesn't charge sales tax.
On October 1, 2021, Maui County Council passed Ordinance No. 5273, Bill No. 101 (2021), Draft 1 establishing a rate of 3 percent on all gross rental, gross rental proceeds, and fair market rental value considered taxable under the definitions of Section 237D-1, Hawai`i Revised Statutes (HRS).
Imposition of HCTAT (Hawaii County Transient Accommodations Tax): Beginning January 1, 2022, the HCTAT is levied at a rate of 3 percent on all taxable rental proceeds attributable to the County of Hawai'i.
Introduction: My name is Nathanael Baumbach, I am a fantastic, nice, victorious, brave, healthy, cute, glorious person who loves writing and wants to share my knowledge and understanding with you.
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