Both Hotel/Resort & Residential A upper-bracket rates saw a minimum $1.00 jump vs. last year
Yesterday, the State of Hawaii released the property tax rates for the 2019-2020 fiscal year and there were notable changes that will affect residential investors. Both the Resort/Hotel and Residential A (Tier 2) class of properties saw a minimum $1.00 jump to $13.90 and $10.50, respectively. Both of these classes target investors in properties like vacation rentals in resort zoning or high-end homes available for rent.
|Residential A (First $1,000,000 of Taxable Value)||$4.50||$4.50|
|Residential A (Taxable Value Above $1,000,000)||$9.00||$10.50|
Residents still enjoy one of the lowest property tax rates in the nation
Residents who live in their own property did not experience a change, with the rate still at $3.50 per $1,000. According to financial website, WalletHub, Hawaii residents still enjoy one of the lowest tax rates in the nation. Additionally, residential investment properties below a $1,000,000 value (Tier 1) stayed put at a rate of $4.50 per $1,000.
How is Hawaii property tax calculated?
Each year, the Real Property Assessment Division (RPAD) does an assessment on each property to determine its “Real Property Value” or more commonly known as your “Property Assessment.” This is the dollar-amount that they have assigned to determine how much property tax you pay (technically, this is not a market valuation or appraisal of your property so that’s why I’m trying to avoid using the term “value”). After this assessment, you are billed at the corresponding tax rate, for every $1,000.
For example, say you live in your home and RPAD assesses your home at $1,500,000. Being an owner-occupant qualifies you for the Residential tier of tax at $3.50 per $1,000, so you would owe an annual amount of $5,250.
How are Residential-A Properties taxed on Oahu?
Residential A properties are typically investment properties that are not occupied by the owner (see RPAD for full definition) and assessed over $1,000,000. Each property’s tax rate is broken down as one-rate for the first $1,000,000 of assessed value and another for any value above that.
For example, say you have an investment property that you rent out annually and RPAD assesses it at $1,500,000. Under the Residential-A tax rules, the first $1,000,000 would be taxed at $4.50 per $1,000 ($4,500), and the additional $500,000 would be taxed at $10.50 per $1,000 ($5,250). Annual tax for this example would be $9,750.
As with any tax issue, consult your CPA
I’m not an account, nor do I claim to be one. Taxes are complicated and a conversation with your accountant might reveal ways the new tax rate can benefit you!
*Image courtesy of jannoon028