a 10% Hawaiian General Excise Tax (G.E.T.) is levied on the rental property income
Every dollar of gross rent paid is subject to the state general excise tax.
UPDATED: 2020 Every county in the state has a 4% rate of the statewide tax. However, there is a 0.5% premium in Oahu, Kauai, and the Big Island.
The calculations for GE tax aren't done using net profit, which means that even if your rental unit isn't producing a net profit, you still have to pay the corresponding amount of GE tax. Even though you are displaying a loss, this is still true. In the end, there is no correlation between profit and bottom line growth.
You must submit a periodic GE tax return if you have a filing frequency. You may learn more about the frequency of your filing by consulting this article: How Often Do I File My Hawaii General Excise Tax Forms?
Depending on how much tax is required, the payment should be made semi-annually, quarterly, or monthly.
Additionally, you will be expected to complete an annual reconciliation form — this form is known as the G49.
In general, a portion of your tax that you pay to the federal government is deductible against your rental income, which reduces your tax liability on your federal tax return.
Filing Articles of Organization with the Department of Commerce and Consumer Affairs (which costs $50) is required in order to create an LLC in Hawaii. To apply, use our online form, by mail, by fax, by email, or in-person. Your Hawaii LLC is legally created via the filing of the Articles of Organization.
Generally, not paying the GE Tax on a rental property is subject to a penalty of 5% every month, with a maximum of 25% per month. Late payment of taxes results in interest charges of around 8% on that amount, with extra willful disregard penalty of up to 25% available as well. Criminal charges might possibly be leveled against those who fail to file taxes.
There are several ways to complete a tax form: Fill it out, send it in, or do it online.
For properties with a rental period of less than a year, it's probable that Hawaii's Transient Accommodations Tax will apply as well.
GE taxes should be included as part of your tenant's rent, and there should be evidence to support this in the lease or rental agreement. If the lease agreement does not already contain it, you may want to spring it on them abruptly. Check out: Passing on the state of Hawaii's General Electric tax to your customers
Visit the Hawaii Department of Taxation for further information.
Now that the limits on short-term vacation rentals on Oahu have been removed, the state is officially in Tier 2 of its economic recovery.
What this implies is that on Oahu, there are around 800 short-term vacation rental homes that were halted due to the pandemic limitations imposed by Honolulu Mayor Kirk Caldwell in April.
Since the beginning of June, when the state's first pandemic-inspired interisland quarantine was removed, short-term rentals have been permitted to operate on Hawaii island and in Kauai and in Maui County. Even after the 8/11 re-imposition of the quarantine on the island of Kauai, Hawaii, Maui, and Kalawao, it did not alter in the slightest.
But even so, it hasn't been an easy ride for vacation rentals in the state. They've been hit much like hotels, airlines, and any other member of Hawaii's tourist sector due to a significant decline in travel demand caused by COVID-19.
September travel demand remained down because out-of-state travellers were required to comply by a 14-day self-quarantine. The state's pre-arrival screening began on Oct. 15, which allowed some tourists to skip the quarantine.
Although Oahu's short-term rental business was greatly limited prior to the epidemic, it was far more regulated than on other islands. Resort- and apartment-zoned areas are the only locations where short-term rental accommodation is permitted unless a property has been awarded a nonconforming use certificate and has maintained it.
Ordinance 19-18, sometimes known as Bill 89, helped the city issue over 1,700 bed-and-breakfast licences so that they could be issued to home-based bed and breakfasts. As a result, there is a bill in Congress that would put back the permit application deadline to January 31 due to the H1N1 epidemic.
While visiting the Island in September, Caldwell had not yet included the short-term rental industry in his core companies. They learned, however, that the greatest, though still low, September occupancy in the state occurred on the island.
The research found that Hawaii's vacation rental occupancy dropped to 14.5 percent for September, a 59 percentage point reduction from September 2019. Resort supply in Oahu plummeted 56% to 97,989 units. The number of households wanting to buy on Oahu decreased to 14,160, though the almost 92% loss wasn't quite as drastic as in Maui or Kauai.
Maui County's vacation rental occupancy fell 68.8 percentage points, from 80.4% in August to 5.4% in September. Maui's supply decreased 48% to 151,521, while demand plummeted 96% to 8,151.
More than 6 percent of Kauai's vacation rental inventory was empty in 2015. demand was down 96% while supply plummeted 49% to 62,133.