Hawaii real property taxes are levied by the county governments and are an important source of revenue to fund public services and infrastructure. Property taxes are assessed annually and vary among the counties of Hawaii, Honolulu, Kauai, and Maui. Each county has its own governing body that sets the tax rates, taking into account the county's budgetary needs and other factors. The rates can vary depending on the property's classification (residential, hotel/resort, agricultural, etc.), the specific tax district, and the actual use of the property. Taxes are calculated by multiplying the assessed value of the property by the applicable tax rate set by the county. Tax rates are typically expressed as a percentage of the property's assessed value or a dollar value per $1,000 of net county assessed value. The assessed value is determined by the county's tax assessor and is based on the property's fair market value.
Property tax assessments are conducted by the Real Property Assessment Division, which determines the taxable value of each property. The RPAD assesses the value of properties based on the fair market value. When assessing property value, factors such as the size, condition, improvements, location, and comparable sales, would be considered. For rental properties, the potential income to be generated could be used as a factor. Once the property's value has been assessed, an assessment notice is sent to property owners by the county. If property owners disagree with the assessed value or believe there are errors, they can file an appeal with the county's Board of Review. Each county has its own specific process and deadlines for filing appeals.
Calculating property taxes in Hawaii involves three key steps: determining the assessed value of the property, applying the applicable tax rates, and considering any exemptions or deductions. The assessed value is multiplied by the appropriate tax rate to calculate the property tax amount due. Any exemptions or deductions that apply, would be deducted from the assessed value prior to calculating the tax liability. Example 1: an owner occupant on Maui with a property assessment of $1,000,000 would be entitled to a $200,000 homeowner exemption, reducing the assessment to $800,000. The tax rate is $1.90, per $1,000 of assessed value (800,000 divided by 1000 = 800 x 1.90 = $1,520 tax liability); Example 2: an owner of a vacation rental on Kauai with an assessment of $1,500,000 with the tax rate of $9.85 (1,500,000 divided by 1000 = 1500 x 9.85 = $14,775 tax liability).
The law allows one (1) home exemption; if spouses live apart and own separate homes, each shall be entitled to one-half (1/2) of one exemption or to an exemption apportioned between their respective homes in proportion to the assessed value. In order to qualify for a home exemption, you must own and occupy the property as your principal residence with the intent to reside on the island so many days in a calendar year: Hawaii - 200 days, Honolulu - 270 days, Kauai - 181 days, and Maui - 270 days. Additionally, the whole property cannot be rented, must have filed income taxes the year prior as a Hawaii resident, and not be behind on property taxes.
The home exemption is deducted from the assessed value and the homeowner is taxed on the balance. Current home exemptions: Hawaii - $40,000, Honolulu - $120,000, Kauai - $160,000, and Maui - $200,000. Exemptions for homeowners 60 years and older: Hawaii (60-69 yrs: $80,000; 70+yrs: $100,000), Honolulu (65+yrs: $160,000), and Kauai (60-70 yrs: $180,000; 70+yrs: $200,000).