[youtube_video] LHiKEGlNl3g [/youtube_video]
Video Transcription
Aloha. This is George Krischke with Honolulu HI 5 (company now called Hawaii Living).
In a different segment we talked about vacation renting your property and we talked about residential zoning, rental term restrictions which normally is 30 days minimum per tenant. We talked about house rule rental term restrictions which sometimes is 60 days or 90 days minimum per tenant. Regardless if you rent your property short term or long term, we need to talk about tax obligations that come along with collecting rental income in Hawaii.
1.) On all gross rents received you have to pay 4.5% General Excise Tax (GET). This is on the gross rent received, not on the rent after expenses, minus expenses. It’s on the gross rent received, 4.5% General Excise Tax.
2.) If you rent your property on a shorter-term basis, that is defined as 180 days or less per tenant, then you’re obligated to pay an additional 10.25% (effective 1.1.2018, previously was 9.25%) Transient Accommodation Tax (TAT)
3) UPDATE effective 12.14.2021: OTAT – Oahu Transient Accommodation Tax (Oahu). All rental revenue from rental terms shorter than 180 days (plus cleaning fees collected) is subject to an additional 3% OTAT. – (Rates for the neighbor islands may differ!)
Those taxes are due either quarterly or monthly depending on how much rental income is generated. There’s a formula for that. Normally they are due on the 20th of the following month after the collection period. So 20 days to send in the taxes.
If these taxes are not received by the 20th, there are hefty penalties and there are late fees and interest that accrues on it. So it’s important to be timely on those payments and it’s important to be accurate on the calculation of those payments. Let me explain.
There is no statue of limitation with general Excise Tax or Transient Accommodation Tax. It means if you ever get audited, the state may require you to open your books going back 3, 5, 7, 10 years, 15 years, whatever it is. So make sure you are accurate with the taxes that are due.
The state has different mechanisms to check also on rental income. For example, did you know that as a renter in the state of Hawaii, you get a $50 tax break, if the renter provides the contact info for the landlord. So if you don’t report it, your tenant might be reporting to the State of Hawaii that he’s paying rent to you, so make sure you pay the appropriate taxes.
There are other requirements we need to talk about. An out-of-state landlord is required to have a local property manager, a local contact, there always needs to be somebody here in the state available that can assist the tenant in case of an emergency.
There are additional reporting requirements that even involve associations. If you rent out your condo in a high-rise condominium building, the association is required to report you as a landlord if the association is aware of it. In fact, nowadays the association could be fined if they don’t report. This is all an effort by the State, it’s all about tax revenue for the State that the State might have been missing.
I stress the importance of this. You have been informed. With all tax matters, always check with your favorite qualified tax professional to get the full details on the latest legislation and how it affects your individual situation.
See related article: GET, TAT & OTAT – The Easiest Way To File & Pay
That’s it. Until next time, ~Mahalo & Aloha.
Aloha All. I am a Hawaii resident. Do I have to pay GET (and TAT) on my rental income from another state?
Aloha Kira!
No. – GET and TAT only apply to rental income from Hawaii properties. More here:
https://www.hawaiiliving.com/blog/get-tat-otat-hawaii-easiest-way-file-pay/
Good luck.
~ Mahalo & Aloha
I have a property manager that remits these taxes for me, however, they charge an additional 4.712% (looks like same as GET) on their management fee. Does this make sense? The manager is already collecting the GET directly as part of the rent from the client, yet I am paying them this seemingly extra GET on the management fees?
Aloha VC!
The GET – General Excise Tax is on all goods and services in Hawaii.
On Oahu, if you go to the store and buy groceries for $100, then the store may collect an extra 4.714% GET from you for a final sales price of $104,71.
On Oahu, if an attorney, plumber, car mechanic, doctor, painter, cleaner, or any other service provider, including a property manager charges you $1,000 for services rendered, they may charge you an extra 4.714% GET for a total amount of $1,047.14.
More about GET here:
https://www.hawaiiliving.com/blog/get-tat-otat-hawaii-easiest-way-file-pay/
Good luck.
~ Mahalo & Aloha
Am I required to pay GET taxes for the deposit received for a rental unit? If so, then can I deduct that amount from my rental income when it’s paid back to the tenant upon vacating the unit?
Most deposits are supposed to be stored differently and not counted as income. It’s simply a deposit. Most states have rules that it can’t be used for last months rent as well because of this. From my understanding It should not be stored in same account as your profits.
Aloha Jerrie,
Thank you for your patience. Catching up…
Mel’s comment below is correct.
Security deposits are not income and are to be held in a separate account in Hawaii.
No GET payment is due unless the tenant forgoes the deposit. Then the deposit becomes additional income, which is taxable.
With all tax matters, it’s best to check with your favorite qualified tax professional.
We are only realtors providing excellent real estate services.
Good luck.
~ Mahalo & Aloha
Aloha
New to the rental market here.
Is the TAT based on 180 day lease – or 180 day stay? If tenant signs a 181 day lease – but terms of rental allow for the lease to be vacated (termination of work contract, military, etc) – are you bound to pay the TAT if the stay equates to less than 180 days – or are you GET only – because the original lease was for 181 days? All the language in the laws speak of “rental terms”. Thanks – I know its semantics – but thought I’d ask.
Aloha Scott!
Great question and I’m not sure of the answer.
Verify with your favorite qualified tax professional.
If the tenant signed a 181-day lease then only GET is due, no TAT.
But I’m not sure if TAT applies if the tenant vacates sooner before 180 days when the original ‘intent’ and the lease was for a 181-day stay.
For the benefit of others, post once you clarify with a qualified tax professional.
I regret, we are only expert realtors.
~ Mahalo & Aloha
Hello George,
What happens with short term rental income reported and then later the rental is cancelled with 80% of rental payment returned, due to the fact cancellation was within a penalty period.
100 % of the GE and TAT and MCTAT were paid to the Sate when the down payment was made for the rental. Is there still GE and TAT? Would the tax be only for GE on the 20% rental income.
No accommodations were provided, so is there still TAT?
Aloha Sharon!
You only pay GET/TAT/MCTAT on the money collected at the time it was collected.
If you must return money after you already paid the tax on it, then you might have to file an amended tax return.
With all tax matters, it’s best to check with your favorite qualified tax professional.
We are only realtors providing excellent real estate services.
Good luck.
~ Mahalo & Aloha
Thank you for this great article! The date in red above is incorrect. I believe based on your comment below that it is 2021, not 2022.
Aloha Charity!
Thank you for your sharp eye and contribution. 🙂
I made the correction.
More on GET/TAT/OTAT here:
https://www.hawaiiliving.com/blog/get-tat-otat-hawaii-easiest-way-file-pay/
~ Mahalo & Aloha
I LIVE AT hAWAII kAI RETIREMENT AND AND AM CHARGED TAX ON MY RENTAL PAYMENT. IS THIS CORRECT?
Aloha Fred Wong!
It is the property owner’s responsibility to pay the GET. However, it is perfectly legal and most common for a property owner to collect the GET from the tenant as a separate pass-through tax on top of the rental base rate, provided the rental agreement is written that way.
More about GET details here: https://www.hawaiiliving.com/blog/get-tat-hawaii-easiest-way-file-pay/
All the Best.
~ Mahalo & Aloha
Aloha George,
Does one have to pay TAT on an a camping vehicle rental?
Aloha George.
A quick one — ha-ha! I read that GE Tax paid is generally deductible against your rental income as a tax expense on your federal tax return. Does this also apply to our TA Tax? Is TA deductible against rental income on the federal tax return too? Thank you.
Aloha Denise!
Of course, it does.
Both GET and TAT can be deducted as expenses on your federal tax return.
Check tax benefits here: https://www.hawaiiliving.com/blog/real-estate-tax-benefits/
More here: https://www.hawaiiliving.com/blog/wealth-creation-with-real-estate/
Don’t take our word for it. Always check with your favorite qualified tax professional.
We are only expert realtors. Call us when you are ready to buy or sell. 🙂
We are here to help.
~Mahalo & Aloha
Have raw uncleared land in Akai on te Big Island I plan to put one or more tiny homes on an use on to live in and the other as a VR
Lot is 20,000sq feet. Tax department changed zoning from agriculture to residential s couple years ago.
Dear George, Maybe I don’t understand the law but I don’t, as a renter, why do I have to pay the 4.5 tax on top of paying rent? can you explain it from a renters perspective why I am paying the 4.5 percent tax. Much Mahalo’s
Aloha Robert Rios!
See my earlier response to Sumant’s comment below.
Good luck. ~ Mahalo & Aloha
With the new 3% added to the Honolulu tax on rentals is that along with the TAT or the GET? In other words, if I do a one year rental, do I charge the GE plus the 3% or is it just GE?
My understanding is anything less than 180 days will get GE tax, 3% Honolulu tax or a wahoo at least and TAT. Am I correct?
Aloha Patti!
Total TAT is now 13.25% effective 12.14.2021 (10.25% TAT plus the additional 3% OTAT to the City & County of Honolulu), assessed on all rental income (and cleaning fees) from rental terms of less than 180 days per tenant. If you rent 180 days or more per tenant, then TAT/OTAT does not apply.
GET is due on all gross rental income and remains at 4.5% of the gross revenue collected.
More here: https://www.hawaiiliving.com/blog/get-tat-hawaii-easiest-way-file-pay/
Good luck. ~ Mahalo & Aloha
Aloha,
Happy New Year!
I just rented a house through VRBO in Kauai for a pretty hefty sum during the Christmas/New Year Holidays for 10 nights (vacation rental company listing on VRBO), and was charged both:
– GET ($956), and
– TAT ($2080)
Are both of these (especially TAT) the responsibility of the guest (vacation home renter)?
If so, are these deductible?
These were in addition to the all other other fee:
– Cleaning Fee ($575),
– Processing Fee ?? ($600+),
– Resort Fee ($1165)
– Damage Protection Waiver ($99 / mandatory?? had no option to not pay),
– GET Tax on Fees.
VRBO of course have their own fee ($970).
The rental was almost 3x the rate during the holiday than what they are charge on average.
We have been visiting the beautiful Hawaiian islands for many years (including Kauai), but this time around felt price gouging by the vacation rental. We have stayed at just as good, if not better places during the same dates at significantly lower prices.
Aloha Sumant!
It is the property owner’s responsibility to pay the GET and TAT. However, it is perfectly legal and most common for a property owner to collect the GET and TAT from the guest as a separate pass-through tax on top of the rental rate. All hotels do it.
GET & TAT details are here: https://www.hawaiiliving.com/blog/get-tat-hawaii-easiest-way-file-pay/
You asked, “If so, are these deductible?” Deductible for you as the guest? Was this a business trip?? – I’m not sure I understand the question.
Real estate tax benefits for property owners are explained here: https://www.hawaiiliving.com/blog/real-estate-tax-benefits/
All the best. ~ Mahalo & Aloha
I rent my unit out and I have a rental that will come in end of Nov and leave in Dec. I usually report the full income in Dec when my tenant leaves. Is that correct or do report/pay taxes based on actual rental dates?
Aloha Lisa!
Thank you for your excellent question.
Taxes are due based on the moment you receive the payment. It has nothing to do with the rental dates, or when the tenant arrives or leaves.
Due dates are explained here:
https://www.hawaiiliving.com/blog/get-tat-hawaii-easiest-way-file-pay/
Let us know if there is anything else we can do for you.
~ Mahalo & Aloha
I have been paying my get quartly for my vacation rental. Whats with the annual payment. g49 ? Isn’t that paying tax twice.
Aloha Danielle!
You must file the annual ‘reconciliation’ forms G-49 (GET) and T-2 (TAT). If you paid all taxes quarterly then there will be no additional tax due on the reconciliation form. However, you must file the form and show the taxes paid vs the taxes that were due.
Check our other article with a tutorial on how to file and pay GET and TAT.
With tax matters, always check with your favorite qualified tax professional.
Call us when you are ready to buy or sell real estate. That’s what we do. We are ready to help you too! ~ Mahalo & Aloha
As a landlord, is there a tax form I am required to provide my tenant with for reporting purposes? If so, what is the form # and law that requires that? Thank you!
Aloha Corry!
No forms required to provide the tenant. However, if the tenant wants to claim a renter’s tax credit, then they will need your tax ID number to report to the tax office. That’s how the tax office will find you if you did not file or pay your tax on the rental income.
For tax questions, always check with your favorite qualified tax professional.
Call us when you are ready to buy or sell real estate. 😉
~ Mahalo & Aloha
I was told that you did not have to pay GET tax if you execute a 6 month lease converting to month to month. Was I misinformed
Aloha Stephen Haray!
All rental income from Hawai properties is subject to GET.
All rental income from Hawaii properties with rental terms less than 180 days per tenant is subject to both:
1.) GET on the GE Taxable Income = Gross Rent plus GET collected (if any), before deducting expenses, and
2.) TAT on the TA Taxable Income (Gross Rent, before deducting expenses).
More details in our GET/TAT post: https://www.hawaiiliving.com/blog/get-tat-hawaii-easiest-way-file-pay/
Don’t take our word for it. – Always check with your favorite professional tax advisor.
Contact us when you are ready to buy or sell. That’s where we excell. We are here to help.
Stay safe. ~ Mahalo & Aloha
I have been seeing on long-term rental postings that the renter needs to pay a GET tax monthly in addition to the monthly rental fee-is this normal for the renter to pay for a long-term rental?
Aloha Megan Brainard Villa!
All rental income from Hawai properties is subject to GET.
Just like a store in Hawaii might charge $1 for a piece of gum plus GET on top, a landlord might charge the rent plus GET on top.
Here is an article that explains the landlord’s obligation to pay the GET:
https://www.hawaiiliving.com/blog/get-tat-hawaii-easiest-way-file-pay/
Let us know if there is anything else we can do for you.
We are experts in selling and buying condos & homes.
We are here to help. ~ Mahalo & Aloha
Does the State pay itself the excise taxes on low income property it rents out? How about property taxes?
Aloha Don, Is that a trick question? We don’t vouch for government actions. Who do you know in local government that might be able to answer your question?
Let us know how we can help you with real estate. ~ Mahalo & Aloha
George Krischke, Principal Broker, Hawaii Living LLC I am serious. Investors have to compete with the government and if there is no property taxes or excise taxes on government owned property, then it wouldn’t be prudent to compete with them for Section 8 markets. I can’t find the answer anywhere
Aloha Don Touchi, I’m not sure I follow. Perhaps you look at it more philosophical? – As an investor, what matters to me is my bottom line net cash flow. Regardless what the government does with their gross rent collected, you as a “for profit investor” get to deduct all property taxes, GET/TAT, and all other expenses on your federal return:
https://www.hawaiiliving.com/blog/real-estate-tax-benefits/
It’s a sweet deal if you are a real estate investor.
Whatever you are trying to figure out why/what government does, good luck finding the answer. ~ Mahalo & Aloha
The state does not pay tax on commercial property that it owns. I would suspect that it does not pay on residential either because that residential would likely be multi-family or condos.
Aloha Mary Jane Feldberg!
Thank you for your comment.
~ Mahalo & Aloha
So if I’m renting a place for $1850 per month ( assuming short term) 3-6 months per stay. How much would have to pay the state of Hawaii out of the $1850. Thanks
Aloha Jimmie,
1) $1,850 x 4.5% (for Oahu) = $83.25 GET due.
2) If you collect the GET ‘separately’ from your rent e.g.:
$1,766.75 rent + $83.25 GET ( = $1,850 total received), then you calculate the TAT only on the rent amount:
$1,850 minus $83.25 GET = $1,766.75 (TAT taxable income) x 10.25% = $181.09 TAT due
See related article: GET/TAT – The Easiest Way To File And Pay:
https://www.hawaiiliving.com/blog/get-tat-hawaii-easiest-way-file-pay/
— Let us know if there is anything else we can do for you.
We are here to help. ~ Mahalo & Aloha
Great information! I’m filling out my G-45 for our residental rental property (non-TAT) and was wondering what some standard deductions/exemptions are…or where I can find that information.
Aloha Brilana, GET is unlike your federal tax. GET is based on all gross rents received before any expenses. On your Hawaii rental income there may not be any ‘standard deductions/exemptions’ available. Reference Schedule GE to understand exemptions/deductions:
http://files.hawaii.gov/tax/forms/2017/g45ge_f.pdf
Here is a tutorial for the easiest way to file and pay your GET:
https://www.hawaiiliving.com/blog/get-tat-hawaii-easiest-way-file-pay/
~ Mahalo & Aloha
Do I have to pay GET on rental property I own on the mainland?
Aloha Lucy, GET is a Hawaii tax and only applies to rental income from Hawaii properties. You do want to check on your tax obligation in the mainland State where your property is located. ~ Mahalo & Aloha
Do the same taxes apply to non-residential rental properties?
Aloha Beth, Thanks for checking in. ‘GET’ General Excise Tax (currently 4.5% on Oahu; 4% on the neighbor islands) applies to all gross rental income for personal property and all real estate, as well as selling all goods and services and even royalties. The answer is yes!
In addition, the ‘TAT’ Transient Accommodation Tax (10.25%) applies to all Transient Accommodation Rental Income, means ‘rental terms less than 180 days per tenant’. Verify with the tax department how your unque situation applies. ~ Mahalo & Aloha
Thank you very much. It is very good infomation to know since I have lots of investors asking me about rental rules in Hawaii at Ward Village. If you need assistance with Ward Village properties, please let me know. Mahalo Hitoshi
Aloha Hitoshi, Glad we can help.
Check related article regarding Ward Village – Kakaako Rental Rules: https://www.hawaiiliving.com/…/kakaako-condos-rental…/
Let us know if there is anything we can do for you. ~ Mahalo & Aloha