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If you own rental property in Hawaii, you are required to pay certain taxes. These taxes vary depending on which island you have your property on. This article is an overview of the taxes you must pay if you own rental property on Oahu. Please note that the taxes you pay will vary depending on whether the property is a long term or short term rental. Additionally, if you use a full-service property management company, the company may collect and pay these taxes on your behalf.

General excise tax (GET): 4.5%

Instead of a sales tax, Hawaii has a GET, which is assessed on all business activity. For rental properties on Oahu, the GET is currently 4.5% and must be paid on gross rental income and can be passed on to the tenant. It is important that you pay this tax according to the required filing frequency. Depending on your tax liability, taxes will be paid monthly, quarterly or semi-annually. You must file (Form G-45) and pay your taxes no later than the 20th day of the month following the close of the filing period. You must also file an annual return (Form G-49). This must be done on the 20th day of the fourth month following the close of the previous tax year. For most people, Form G-49 must be filed no later than April 20 of the following year.

Temporary residence tax (TAT): 10.25%

If the property is used as ‘temporary’ accommodation (short term rental) you will need to pay VAT. The State of Hawaii defines «temporary» placement as:

“Temporary housing is a room, apartment, house, condominium, beach house, hotel room, suite or similar dwelling unit rented to a temporary person for less than 180 consecutive days.”

The TAT is levied on gross rentals or gross rental proceeds, which are any amounts received by the operator in cash, goods or services for the rental of temporary housing without any deduction for expenses. If you charge guests a cleaning fee, that fee is considered revenue and must be included in your TAT calculations. TAT must be paid within the same time frame as your GET payments.

Is income ever exempt from value added tax?

There are situations where you are not required to pay TAT taxes in Hawaii. If your guests meet the following requirements, you may be exempt from TAT:

• Low-income tenants who receive rent from the state or federal government and whose rental periods are less than 60 days.
• Housing facilities for military personnel permanently stationed in Hawaii, including military personnel who are receiving temporary housing benefits while seeking housing in Hawaii or awaiting transfer outside of Hawaii.
• Housing is provided by non-profit corporations or associations organized for religious, charitable or educational purposes.
• Housing provided to foreign diplomats and consular officers holding cards issued or authorized by the United States Department of State granting them an exemption from government taxes.

Oahu Temporary Occupancy Tax (OTAT): 3%

The Oahu Transient Occupancy Tax (OTAT) is currently 3%. OTAT is imposed in addition to TAT. Taxpayers registered in the state and having a valid state TAT number will be considered registered for OTAT. Taxpayers subject to OTAT do not need to register separately with the city.

Important miscellaneous information:

• Operators must display a TAT registration certificate in each rented room, apartment or other temporary accommodation. Instead of publishing the certificate, you can post a notice informing the guest or tenant where the certificate can be verified.
• An out-of-state operator requires that there be a local person or entity on the island who can assist the tenant if necessary. You must include the name, telephone number and email address of your local contact person in the same location where your certificate of registration or notice is posted.
• There is no statute of limitations for GET or TAT. Therefore, it is very important that you make the appropriate payments on time.

This information is provided simply as an overview of the taxes applicable to owning investment property on Oahu. Please note that this information is subject to change and I am not a tax advisor. It is highly recommended that you consult with a qualified tax professional prior to purchasing investment property in Hawaii to obtain the most current tax information and how it may apply to you.

Looking for investment properties in Hawaii? Just call us at +1(808)666-9936 or click here. fill the form.  We are here to serve you and look forward to helping you achieve your real estate goals.

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