Rental Property Taxes in Hawaii (2026 Guide)

1. Property Tax: Rentals Lose the Home Exemption

Hawaii's property tax is levied by the four counties (Honolulu/Oahu, Maui, Hawaii, Kauai), not the state, and its owner-occupied effective rate (~0.29%) is the lowest in the nation. But that headline is for owner-occupants — rentals are taxed differently. An investor-held property loses the owner-occupant home exemption and can be pushed into a higher tax class:

Home exemption — gone. On Oahu, owner-occupants knock $120,000 ($160,000 if 65+) off taxable value. The exemption applies only to a primary home, so a rental keeps its full assessed value as the taxable base.
Residential vs. Residential A (Oahu). A non-owner-occupied residence assessed at $1,000,000 or more with no home exemption is classified Residential A, taxed at $4.00 per $1,000 on the first $1M and $11.40 above it — versus $3.50 for ordinary Residential (FY2025-26 rates).
Short-term rentals pay more. Oahu's Bed-and-Breakfast Home class runs $6.50 per $1,000 and the Transient Vacation class $9.00-$11.50 — set by city ordinance under Honolulu's consolidated city-county powers.

The pattern holds across all four counties: non-owner-occupied rates run several times the owner rate. On Maui, an owner-occupied home is taxed at $1.65 per $1,000 while a non-owner-occupied one runs $5.87-$17.00. The "lowest property tax in America" applies to homeowners — not to your rental.

2. Income Tax (Up to 11%)

Hawaii has a graduated income tax topping out at 11% — among the nation's highest — under HRS §235-51. The brackets were reset by Act 46, SLH 2024 (the 11% top rate is retained; the income threshold for it widens over the next several years). SheltrIQ's engine computes the exact liability for your bracket and filing status.

The most important Hawaii income fact for landlords sits outside the income tax entirely — the General Excise Tax on your gross rent. See the GET callout in the capital-gains section below, and budget for it separately.

3. Capital Gains: the 7.25% Alternative-Tax Cap

Hawaii taxes net capital gains under an alternative-tax cap of 7.25% (HRS §235-51(f)). You compute your tax two ways — the regular graduated tax on all income (up to 11%), versus the regular tax on your ordinary income plus a flat 7.25% on the net capital gain — and pay the smaller. For a rental sold after more than a year, that caps the state rate on the gain at 7.25% instead of 11%, a meaningful break on disposition.

GET on rent is the defining Hawaii landlord tax. Hawaii's General Excise Tax (HRS Ch. 237) applies to gross business receipts — and renting real property is a taxable business activity, so LONG-TERM residential rent IS subject to GET at 4% statewide, plus a 0.5% county surcharge on Oahu for 4.5%. It is charged on gross rent (not net profit), you need a GET license (one-time $20, Form BB-1), and you may pass it through to tenants. Short-term rentals owe GET AND the Transient Accommodations Tax (TAT, ~10.25% state under HRS Ch. 237D) plus a county TAT.

4. Bonus Depreciation Add-Back

Hawaii does not conform to federal bonus depreciation — IRC §168(k) is explicitly "not operative" for Hawaii under HRS §235-2.4(m), so you must add the bonus back and depreciate on the regular MACRS schedule for state purposes. Hawaii also caps the §179 expensing deduction at $25,000 (HRS §235-2.4(o)), far below the federal limit. Keep a separate Hawaii depreciation basis: the Form N-11 instructions require attaching a Hawaii Form 4562 and reconciling the federal-vs-Hawaii difference each year.

5. Conveyance Tax (Higher for Investors)

Hawaii has no separate real-estate transfer tax but levies a conveyance tax (HRS Ch. 247), paid on the sale, with two tiered schedules — and investors pay the higher one (HRS §247-2):

Buyer eligible for a county home exemption (an owner-occupant of a condo or single-family residence): $0.10 per $100 up to $1.00 per $100 at the top tier.
Buyer NOT eligible (investors / non-owner-occupants — all other transfers): $0.15 per $100 up to $1.25 per $100 at the top tier.
Tiers step up by property value, from under $600,000 to over $10,000,000. A $1.00 minimum applies, and the certificate is filed on Form P-64A.

6. LLC Annual Fee ($15)

A Hawaii LLC files an annual report with the DCCA Business Registration Division with a $15 fee (cca.hawaii.gov), due in the calendar quarter the LLC was registered. Separately, if you collect rent you also need a GET license (one-time $20, Form BB-1) before reporting that 4% GET.

7. Rent Control

Hawaii has no statewide rent control. The Residential Landlord-Tenant Code (HRS Ch. 521) caps neither rent amount nor increase frequency — its only rent-increase limit (§521-74) bars retaliatory increases. You set rents at market.

8. Security Deposit Rules

One month's rent — the deposit may not exceed a sum equal to one month's rent (HRS §521-44(b)), plus a separately agreed pet-damage amount.
Return within 14 days of the rental agreement terminating, with a written itemized statement of any deductions and evidence of the costs (HRS §521-44(c)).
Miss the 14 days and you must return the entire deposit.

9. How SheltrIQ Helps Hawaii Landlords

Hawaii stacks an 11% income tax, GET on gross rent, and a bonus add-back — SheltrIQ keeps every layer straight:

Up-to-date income modeling — applies Hawaii's graduated rates topping at 11% under the Act 46 brackets, not stale tables.
Disposition modeling — applies the 7.25% capital-gains alternative-tax cap so a rental sale is taxed at its true state rate, not the full 11%.
Bonus-depreciation tracking — flags the Hawaii §168(k) add-back and the $25,000 §179 cap, and keeps a separate Hawaii basis.
AI Schedule E classification — sorts each expense to the right line so your Hawaii return starts from an accurate federal one.

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