GET on Oahu

Some of the questions we are asked by buyers purchasing homes on Oahu are about taxes. As mentioned previously, Hawaii Real Property Taxes are among the lowest in the entire United States. We love this about Hawaii! However, we do have other taxes, such as GET, which will impact homeowners.

Hawaii General Excise Tax (GET)

One of these taxes is the Hawaii General Excise Tax. This tax is assessed by each County, based upon the gross revenue received by a taxpayer. Many people confuse the Hawaii General Excise Tax with sales tax because it is generally tacked on to the price of goods and services purchased, like a sales tax. You will see GET on your check at a restaurant and on your receipt at a clothing store in the mall, just like a sales tax. There are some significant differences, however, and this is not a sales tax. Hawaii does not have a sales tax. But you should be aware, if you are self-employed, you will owe GET tax to the State of Hawaii, in addition to both state and federal income tax.

Differences Between Sales Tax and Hawaii GET

With a sales tax, the tax is assessed against a PURCHASER of goods and services at the time of purchase. Though, if the provider of the goods and services does not charge the purchaser the sales tax, for whatever reason, the provider may still be liable for this tax. With Hawaii GET, the tax is assessed against the PROVIDER of the goods and services, who is authorized by the State of Hawaii to pass the tax on to the purchaser. A provider is always responsible for the tax and it is paid later, to the State. Importantly, it is assessed upon gross receipts, without taking into account costs or expenses, and whether there is any profit at all from the transaction. GET is assessed also regardless of whether it is passed on to the purchaser. The consolation, if any, is that there is no sales tax in Hawaii and GET on Oahu and the other islands is much lower than most sales taxes assessed on the mainland.

What is Oahu GET?

For 2022, the Hawaii GET is 4%. There is also a Honolulu County (Oahu) surcharge of 0.5%, for a total of 4.5% GET. Consumers will see this passed on as a tax of 4.712% on their bills for goods and services, because GET is actually owed on the tax collected. Yes, there is GET on the GET!

How Does GET Impact an Oahu Homeowner?

You will see GET passed on to you on the following:

~ Your purchases at retail establishments
~ Services from people such as contractors, plumbers, electricians, etc.
~ Services provided by Realtors, lawyers, accountants, and other licensed professionals
~ Online purchases shipped to Hawaii

You also will owe GET yourself, even if you are not self-employed, for:
~ Rental revenue received for investment properties
~ 1099 income received from any source

NOTE: You do NOT owe GET for income received through capital gains in selling a home (this is covered by federal and state Capital Gains Tax) or on the sale price of a home (this is covered by Conveyance Tax).

This is not an all inclusive list of items which warrant payment of GET to the State of Hawaii. Please consult with your tax professional for detailed questions on whether or not you will owe GET for any particular circumstance.

Oahu Real Property Taxes for 2022-2023

Nothing much changed from last year, with respect to the Honolulu County (aka Oahu) Property Tax Rates charged to residential property owners. (See Resolution 22-45, adopted 6/1/2022 by the Honolulu County City Council). Particularly, one great thing that did not change is that Hawaii real property tax rates fare, overall, the lowest in the United States.

Home Exemption Stays Constant

The amounts of an owner-occupant Home Exemption also stayed constant. The general exemption remained at $100,000. In addition, the tax exemption for owner-occupant seniors, over age 65 remained steady at $140,000.

How The Owner-Occupant Home Exemption Works

To be eligible for a home exemption you and your property must meet the following criteria:

(1) You own and occupy the property as your principal home (the dwelling
where you live most of the year or more than 270 calendar days per
year);
(2) Ownership of the property is duly recorded at the Bureau of
Conveyances or duly filed in the office of the assistant registrar of
land court if the property is registered in land court pursuant to HRS
Ch. 501, on or before September 30th;
(3) In the case of a lease, the lease of the parcel has a term of five (5)
years or more, used for residential purposes as the lessee's principal
home, the lease and any extension, renewal, assignment or agreement
to assign the lease is duly recorded at the Bureau or duly filed in the
office of the assistant registrar of land court if the property is
registered in land court, the lessee agreed under the lease to pay all
real property taxes during the term of the lease, by September 30th; and
(4) You file a claim for home exemption with the Real Property
Assessment Division on or before September 30th preceding the tax
year for which you claim exemption.
** A separate exemption claim should be submitted for each owner occupant

If you are eligible for a home exemption, the amount of your exemption is deducted from the total assessed value of the land plus improvements. This leaves you with a figure called “net taxable value” upon which your Oahu real property taxes are calculated.

Stunning mountain view in Kaneohe, Oahu, Hawaii, to take your mind off Oahu Real Property Tax Rates

Oahu Real Property Tax Rates for 2022 and 2023 Fiscal Year

There no substantive changes to the real property tax rates, themselves, over those charged in the 2021-2022 FY.

Here are all of the categories and the applicable rates:

HONOLULU COUNTY OAHU PROPERTY TAX RATES
July 2022-June 2023
(Amount of Tax Per $1000 of Net Taxable Value)Residential (A)$3.50Hotel and Resort (B)$13.90Commercial (C)$12.40Industrial (D)$12.40Agricultural (E)$5.70Preservation (F)$5.70Public Service (G)$0.00Vacant Agricultural (H)$8.50Residential A – Tier 1 (I)
(Applied to the net taxable value of the property up to $1,000,000)$4.50Residential A – Tier 2
(Applied to the net taxable value of the property in excess of $1,000,000)$10.50Bed & Breakfast Home (J)$6.50

Calculating Oahu Property Tax Rates for RES-A Properties

Residential A properties use a tiered tax calculation. The first $1 million of net assessed value is calculated at one rate and the remainder at another. Here is how it works:

Honolulu Harry owns a Property A in Honolulu County (Oahu) with a net tax assessed value of $1,400,000, and rents Property A out to a long-term tenant. He lives in another home, Property B, on Oahu and takes a home exemption for that property. Since he resides in another home and rents Property A, he is not eligible for a home exemption on Property A.

Harry’s property is a Residential A property (see below). The Oahu property tax rate for the first $1,000,000 of net taxable value (Residential A – Tier 1) is $4.50 per $1,000, so the tax on that portion of Property A is $4,500. The Oahu property tax rate on the next $400,000 (Residential A -Tier 2) is $10.50 per $1,000, so the tax on the second portion of the value is $4,200. Adding those two figures together, the total annual property tax on this Residential A property would be $8,700.

However, If Honolulu Harry resided in Property A (and had applied for and received his owner exemption of $100,000), his total tax on Property A would be $3.50 per $1000 ($3.50 x $1,300,000 /$1,000), for a total annual property tax of $4,550.

Which Properties are Residential A (or RES-A)?

Residential A properties are certain properties on Oahu that are without an owner-occupant home exemption. These are:

1. Condominium units without home exemption.

2. Residential lots zoned R-3.5, R-5, R-7.5, R-10, R-20, with either one or two single family homes, without home exemption.

3. Residential vacant lots zoned R-3.5, R-5, R-7.5, R-10 and R-20.

As you can see from the Honolulu Harry example above, Oahu property tax rates for 2022-2023 are significantly higher for Residential A properties than they are for similarly valued owner-occupied properties.

If you have other questions regarding purchasing Oahu real estate, please contact Yvonne at 808.721.8088. ~ Aloha

Getting Out on Oahu: What Oahu Parks and Oahu Hiking Trails are Open?

By Ana Kuna

We Seem to be Glued to the Internet.

During this rather unsettling and restless time of COVID-19/Pandemic 2020, the news floods us with media reports, case status updates, economic doom, and gloom. The Internet is full of lists of things to do while staying at home. There is much on what to watch, what to learn, even how to cook and clean! Fortunately, the Internet also shows an extremely positive sense of community, strength, and humanity. The positive news and upbeat stories are wonderful to see in the world. But at some point we need to get off the Internet!

We’re Restless & We Want to Go Outside.

If you have small children, with shorter attention spans, like I do, you may find being cooped up a little suffocating. We seem to always be inside now — Internet trending, homeschool Zoom-ing. Things can get rather frustrating. Our family is accustomed to being outside, playing either at the beach, park or in the mountains. If you are like us, you may find the Governor’s extension of the Oahu “stay-at-home, work-from-home” Order — through May 31st — to be very daunting!

Oahu Parks Are Open April 25!

What can we do to combat this boredom at home? Thankfully, Mayor Kirk Caldwell will be reopening the City and County of Honolulu Parks, on Saturday 4/25/2020. Starting at 5:00 am, we can all exercise in our Oahu Parks within the social distancing guidelines. Oahu Parks allow running and walking, but no team/group sports or activities. For my ohana, this is exciting news!

What Oahu Hiking Trails Are Open?

In addition to parks, hiking trails are options for outdoor adventure. Many hiking trails have still been open in the past few weeks.  To hike legally, we have been checking the State of Hawaii, DLNR, Division of Forestry & Wildlife, Na Ala Hele Trail & Access Program Website. Here, you can check to see what Oahu hiking trails are open to the public.

Select Na Ala Hele program trail locations allow trail activities like hiking, running, and biking. All open trails require social distancing. The website states as follows: “No more than two (2) people are allowed on State hiking trails unless they are part of the same family or household. Please be responsible when engaging in outdoor activities by following CDC guidelines and maintaining social distance at all times. Please exercise good judgment, be safe, and respect trail head neighborhoods and communities.”

We are so grateful that we can get out into nature on this beautiful island. If you are lucky enough to live in Hawaii and also have children, get outside for some fresh air and let your kids burn up some energy. Or maybe you, yourself, need some peace & quiet, for reflection, during this new, unknown & a little crazy time. In either situation, check out the Na Ala Hele Trail & Access Program and give yourself a break in the stunning mountains of Oahu.

Even though this is a very trying moment in time, we can all be very grateful for the positives that this pandemic has brought out in humanity and the new perspectives we are truly embedding into our lives. I think we all have a greater appreciation and awareness for our communities and our planet. Be safe, be healthy, and be kind. ~ Aloha