Page Guide: Residential Tax Rates | Hotel & Airbnb | Filing a Home Exemption | Disputing Your Property Value

The property tax system in Honolulu, the state of Hawaii's capital and largest city, is based on the property's market value. The City and County of Honolulu sets the property tax rates, which are used to pay for a variety of city and county services like schools, public safety, and infrastructure upgrades.

Honolulu Property Taxes (2022-2023)

Property taxes in Honolulu are computed by dividing the assessed value of the property by the applicable property tax rate. The city assessor determines a property's assessed value, which is based on both the market worth of the property and any improvements made to it. The city assessor revalues the property every two years, and the assessed value is often less than the market value.

There are nine separate rates for property taxes in Honolulu

Residential properties that have four or less units of multifamily housing, single-family homes in Honolulu are subject to this rate. In Honolulu, the rate of residential property taxes is now $3.50 per $1,000 of assessed value.

Residential A refers to a parcel, or portion thereof, that includes no more than two single-family dwelling units; Has an assessed value of $1,000,000 or more, does not have a home exemption; is zoned R-3.5, R-5, R-7.5, R-10, or R-20 or is dedicated for residential use. This includes vacant land zoned R-3.5, R-5, R- as well.  The Residential A classification's single tax rate to a two-tiered rate structure for tax years beginning on July 1, 2017. This is tax classification is one the most important things to know before investing in Hawaii.

• (1) Residential A Tier 1 tax rate, which is applied as 0.45% of the property's value up to $1,000,000.

• (2) Residential A Tier 2 tax rate, which is applied as 1.05% of the property's value over $1,000,000. Example: You own a home in Kailua whose property net value is $1,500,000. The tier 1 tax obligation is calculated as follows: $1,000,000 x .045 = $4500/yr annual taxes. We must now account for the Tier 2 tax obligation for the remaining $500,000 which calculates as $500,000 x .0105 = $5,250. Total tax obligation would be the sum of Tier 1 and Tier 2 at $10,250/yr. 

Hotel & Resort zoned properties are subject to this tax. These are properties utilized for transitory lodging, such as hotels, motels, and Hawaii vacation rentals. Since July 1, 2020, Hawaii vacation units will fall under the existing hotel-resort tax class, while bed-and-breakfast establishments will have their own tax class. Prior to fiscal year 2020, the Hotel and Resort tax may have been applied to all Hawaii short-term vacation rentals, such as rooms rented on Airbnbs (Class J). You can ask to have your condo converted from a Hotel & Resort zone to a residential zone if you are not operating it as a hotel.

Using the Hotel & Resort property tax rate as an illustration:

Every year, a couple their Turtle Bay Condo on Hawaii Airbnb with a property value assessment of $1,600,000.  $1,600,000 multiplied by 0.0139 equals $21,264 in projected yearly taxes.

Bed & Breakfasts are Oahu short term rentals of less than 30 days where the owner or another operator is present throughout the stay are referred to as bed and breakfasts. A typical B&B may be when someone rents out a room in their residence on Airbnb. Transient vacation rentals (TVRs), which are taxed at 1.39% in the hotel & resort class, are classified as "unhosted" or "whole home" rentals of fewer than 30 days when an owner or operator is not present.

Up to 1,700 new rentals are anticipated to be permitted by the Department of Planning and Permitting in the near future on Oahu; however, as of April 6, 2021, the registration process has been postponed because of potential difficulties. Find out more about Oahu and the other islands' short-term vacation rentals here. Only time will tell when more customers will be charged this particular fee; it will be included in the City and County of Honolulu's new regulations and clarifications on short-term vacation rentals.

An illustration of the B&B property tax rate might be: In North Shore Oahu, a family owns a property with a $900,000 tax assessment. They were fortunate to be one of the residences that could offer short-term holiday rentals to guests. On Airbnb, they now let a room in their home to primarily single guests. $5,850 is the projected yearly tax ($900,000 x 0.0065).

They were paying the $3,150 residential property tax prior to being designated as a bed and breakfast property. Due to the fact that they now rent a room on Airbnb and are considered to be a legitimate Bed and Breakfast, they must pay $2,700 extra in taxes each year.

Agriculture refers to land in Hawaii, with a farm dwelling, that is used for the cultivation of crops, animals, and other agricultural products. 

Preservation land in Hawaii refers to land that is set aside for the protection and conservation of natural resources and habitats. This can include land that is designated for the protection of endangered species, wetlands, forests, and other ecosystems.

Commercial & Industrial This rate is applicable to properties used for business or industry, such as offices, warehouses, and retail establishments. Honolulu currently charges $1.24 in commercial property taxes for every $1,000 in assessed value.

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Getting a Home Excemption in Hawaii

Don't forget to apply for your Honolulu Home Exemption by September 30 if you just bought a new house to avoid paying higher property taxes. The City and County of Honolulu's basic homeowner exemption now stands at $100,000. (for homeowners younger than 65 years). In other words, $100,000 will be subtracted from the assessed value of your property when it is valued, and the remaining balance will be subject to tax. For instance, if your property was assessed at $600,000, the final taxable amount would be $500,000 after your Home Exemption claim.

Homeowners who were 65 years of age or older (on or before June 30 of the previous tax year) are eligible for a $140,000 deduction.

Although you have until September 30 to file, it's better to do so within the first 90 days after getting your house so you don't forget. Once you've claimed your exemption, you don't need to do so again in the future because this is a "one-and-done" claim (unless you move).

Who is eligible for a home exemption?

To be eligible, the following must apply:

• You are the owner and reside there as your primary residence (that means you must live there for 270 days out of the calendar year)
• Your ownership is documented at the State Department of Land and Natural Resources' Bureau of Conveyances in Honolulu on or before September 30 of the tax year prior to the one for which you are requesting the exemption.
• On or before September 30 of the tax year prior to the one for which you are claiming the exemption, you submit a claim for a home exemption (Form P-3) to the Real Property Assessment Division.

What do I need to submit to get an exemption for my Oahu home?

You'll also want to have these things on hand to save some time:

• Tax map parcel and key Your property's ID (TMK number)
• Driver's license, state identification card, birth certificate, or other legally binding document as proof of age

How to dispute property tax assessment in Hawaii

Every year, the City and County of Honolulu sends out the Honolulu Real Property Tax Assessments around December 15th. These forms detail your new Assessed Property Value, Land Class, and Amount of Excemption (if any). Sometimes these figures may be well above the true market value for a home like yours in your neighborhood and if that's you, don't be alarmed -- you can dispute it under the following grounds of appeal:

• Tax assessed value exceeds 10% of the market value for the home or,
• Lack of uniformity or inequality,  brought about by the illegaility of the methods used or error in the application of the methods to the property involved, or
• Denial of an exemption to which the taxpayer is enetitled and for which person has qualified, or
• Illegality, on any ground arising under the Constitution or lawas of the United States, the laws of the state or ordinaces of city in addition to ground of illegality of methods used mentioned in item 2.

File An Appeal on or before January 15th

When preparing to file an appeal, you will want to find 5 comparable sales to your home, in your neighborhood, to support your claim for a lower value. Before filing an appeal -- contact an appraiser in Hawaii to discuss option to appeal to:

1. Board of Review of the City and County of Honolulu
2. Tax Appeal court of the State of Hawaii