Important Note: This blog post is for informational purposes only and does not constitute legal, tax, or financial advice. Hawaii property tax rules, conveyance tax rates, and withholding requirements are subject to change and vary based on individual circumstances. Buyers and Sellers should consult a qualified Hawaii real estate attorney, CPA, or tax advisor before making decisions based on any information contained here.
A New Layer in the Big Island Property Tax Picture
Property taxes in Hawaiʻi have long been among the lowest in the United States. That dynamic is shifting, particularly for luxury second homes, and Buyers exploring the Kona and Kohala Coast real estate market should understand what is changing and why.
Hawaiʻi County is moving toward a new third tier of residential property taxation targeting homes valued at $4 million or more that are not owner-occupied primary residences. The proposal moved through its first reading at the County Council, representing a meaningful shift in how the county approaches luxury real estate. Reporting from Hawaiʻi Public Radio and Big Island Now has tracked this legislation closely.
The Current Hawaiʻi County Residential Property Tax Structure
Hawaiʻi County currently operates with two residential property tax tiers. Owner-occupied primary residences are taxed at $11.10 per $1,000 of assessed value. Non-owner-occupied residential properties, including second homes, vacation rentals, and investment properties, are taxed at $13.60 per $1,000, according to reporting from Big Island Now. These rates are notably low by national standards.
For context, a $3 million non-owner-occupied property on the Big Island would carry an annual property tax bill of approximately $40,800 under the current $13.60 rate. Many mainland markets would consider that figure remarkably modest.
The Proposed Third Tier: What Changes at $4 Million
The proposed legislation would create a third tier specifically for residential properties valued above $4 million that are not the owner’s primary residence. Big Island Now reported that the Hawaiʻi County Council passed the new tier on its first reading, signaling meaningful legislative momentum. The specific rate for the new tier had not been finalized at the time of this writing.
Buyers considering properties at or above the $4 million threshold, including resort community estates on the Kohala Coast and premium oceanfront properties in Kailua-Kona, should monitor this legislation closely and factor a potentially higher annual carrying cost into their purchase analysis.
Critically, primary residences are excluded from the new tier. A Buyer who purchases a $4 million or $5 million property as their principal home and successfully files for the county homeowner’s exemption would remain in the lower owner-occupied category.
Why This Matters for the Kona and Kohala Coast Market
The $4 million threshold places this new tier squarely in territory relevant to a meaningful portion of the luxury second-home market on the Big Island, particularly properties within the major resort communities of the Kohala Coast. For Buyers operating below $4 million, including the majority of properties currently active in the Kailua-Kona, North Kona, and Holualoa markets, the proposed new tier does not directly apply. Explore current listings on the Marco In Kona active listings page.
What Buyers Should Do With This Information
Property tax implications should be part of every informed purchase decision in the luxury market. Marco A. Silva encourages all Buyers to work with a qualified Hawaii real estate attorney and CPA to understand how current and proposed tax rules apply to their specific situation. To explore active listings and discuss how property tax considerations apply, connect with Marco A. Silva directly.
Sources
Hawaiʻi Public Radio: ‘Ultra luxury Hawaiʻi Island homes could get separate property tax tier’
Big Island Now: ‘Proposed new Hawaiʻi County tax rate for luxury second homes passes first reading’
Abode2: ‘Hawaii Moves Toward New Luxury Property Levies’
Frequently Asked Questions: Hawaiʻi County Property Tax and Luxury Real Estate
What are the current Hawaiʻi County residential property tax rates?
Hawaiʻi County currently has two residential tiers: $11.10 per $1,000 of assessed value for owner-occupied primary residences, and $13.60 per $1,000 for non-owner-occupied properties including second homes and investment properties. These figures are based on Big Island Now reporting and are subject to change. Verify current rates with Hawaii County directly.
What is the proposed third-tier property tax for Hawaiʻi County?
Hawaiʻi County has proposed a third tier targeting non-owner-occupied residential properties valued at $4 million or more. The specific rate had not been finalized at the time of this writing. The new tier would not apply to owner-occupied primary residences that qualify for the county homeowner’s exemption.
Does the new luxury property tax tier affect all Big Island home purchases?
No. The proposed tier targets non-owner-occupied properties at or above $4 million. Properties below that threshold and owner-occupied primary residences that qualify for the homeowner’s exemption are not affected by the proposed new tier.
How does the homeowner’s exemption affect property tax rates on the Big Island?
Qualifying for the Hawaiʻi County homeowner’s exemption places an owner-occupied primary residence in the lower $11.10 per $1,000 tax tier. Eligibility requires using the property as a principal home and filing with Hawaii County within the required deadline. Buyers should consult Hawaii County and a local attorney to confirm eligibility for their specific situation.
How do I learn more about how property taxes affect a specific listing I am considering?
Contact Marco A. Silva through marcoinkona.com/contact to discuss specific properties and work through tax considerations with appropriate professional advisors as part of your due diligence process.
Important Note: This blog post is for informational purposes only and does not constitute legal, tax, or financial advice. Hawaii property tax rules, conveyance tax rates, and withholding requirements are subject to change and vary based on individual circumstances. Buyers and Sellers should consult a qualified Hawaii real estate attorney, CPA, or tax advisor before making decisions based on any information contained here.