Honolulu raises property taxes on short-term rentals

Property tax bills for Honolulu short-term rental (STR) owners will go up this year under the latest budget approved by the City Council. Starting July 1, 2024, STR owners who don’t live in their properties will be charged $9 per $1,000 of value up to $800,000 and $11.50 for anything above that. The previous rate was $4 per $1,000 of assessed value up to $1 million. Hotels pay $13.90 per $1,000 of assessed value.

STRs in Hawaii have been under scrutiny for years amid concerns about the state’s housing crisis. In May, the state took a big step when Governor Josh Green signed a bill that provides counties more powers to regulate short-term rentals, including banning them. The law gives counties home-rule authority to prohibit vacation rentals. Counties must pass their own legislation to change current local rules. 

The City and County of Honolulu is weighing its options on how to change its STR regulations.

In the meantime, the Honolulu Department of Planning and Permitting has begun a six-month process of implementing software to crack down on STRs that are breaking current laws. 

Honolulu passed a strict STR ordinance in April 2022 that banned rentals of between 30 and 89 days in non-resort areas. Under previous laws, short-term rentals were defined as rentals of at least 30 days. However, in January of this year, a federal judge ruled that existing Honolulu STRs could continue operations, but that the ban on rentals of 30 to 89 days would apply to STRs established after the law was passed. The ordinance only allows STRs in resort-zoned areas, including Waikiki and Ko Olina. Violations can result in fines of up to $10,000 per day.

In Maui, Mayor Richard Bissen has already introduced a measure to phase out STRs in apartment districts in Maui County. It will be reviewed by Maui, Molokai, and Lanai planning commissions. After their recommendations are added, the bill will go to the county Housing and Land Use Committee, then the Maui County Council will consider the proposal.

Hawaii STR income is subject to state and county transient accommodations tax (TAT) as well as general excise tax (GET). STR operators must pay the taxes based on their gross rental proceeds but can pass these taxes on to guests. Hosts must be registered with the state’s Department of Taxation, file lodging tax returns, and pay county taxes to Honolulu tax authorities and state taxes to state authorities. STRs generate about 35% of the state’s TAT, according to state officials.

While STR marketplaces such as Airbnb and Vrbo collect taxes on behalf of their hosts in many states, they’re not allowed to do so in Hawaii. That means hosts are responsible for taking care of all tax obligations, including registering, filing lodging tax returns, and paying taxes to both the state and the county.

Avalara MyLodgeTax can help Hawaii short-term rental hosts automate registration and filing for state and county TAT and state GET. For more on lodging taxes in the state, see our Hawaii vacation rental tax guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.