If you live in your home or condo as your primary residence in Honolulu County, that is the island of Oahu, you need to claim your Home Exemption. This is a tax break that will save you thousands of dollars in property taxes.
You need to file by September 30, the annual filing due date. Your tax break will take effect next fiscal year, starting July 1st after the Sept filing deadline.
1.) Are you eligible?
You must own and occupy your Honolulu property, with the intent to live in it as your primary residence. You can only have one primary residence.
Proof that this is your primary residence could include:
· Evidence you live at this address for 270 calendar days per year.
· Subject address shows on your voter registration.
· Subject address shows on your State or Federal income tax return.
Also, you need to be at least 18 years of age and be a legal resident in Honolulu County.
2.) How much can you save:
If you file for your home exemption you receive either:
- A.) $80,000, the standard home exemption, or
- B.) $120,000, if you are 65 years or older by June 30th prior to the Sept 30th filing deadline.
The home exemption amount will be deducted from the assessed value. You will only be taxed on the net assessed value. (Assessed value – home exemption = net assessed value)
Example: Let’s say our primary residence is assessed at $900,000. You are 65 years by June 30th this year and you file on time by Sept 30 this year. Effective July 1st next year you will only be taxed on $780,000 net assessed value ($900K – $120K = $780K). At the $3.50 rate per $1,000 assessed value this will save you $420 per year compared with no home exemption.
But the real big savings are realized when, either:
- your property is assessed at $1Mill or above, or
- the property is zoned “Hotel & Resort’, e.g. a condotel
Because in Honolulu county there are three relevant property tax rates that come into play:
· Residential: $ 3.50 per $1,000 assessed value – Regular residential property tax rate for homes and condos. That is about the cheapest residential property tax rate anywhere in the whole nation.
· Residential Rate ‘A’: UPDATE: new tax rate as of 7.1.2017:
$4.50 per $1,000 (0.45%) of the net taxable value for Oahu homes and condos assessed up to $1Mill that have not filed for the home exemption.
$9.00 per $1,000 (0.9%) of the net taxable value for Oahu homes and condos assessed above $1Mill that have not filed for the home exemption.
· Hotel and Resort: $ 12.90 per $1,000 assessed value – If your property is a resort zoned property, e.g. a condotel like Trump Tower, Ritz Carlton, Ilikai, or others. (Tax rate more than 2.5 times the regular rate), unless you filed for dedication for residential use.
Filing the home exemption will not only get you the $80K or $120K exemption amount, but also it will drop your tax rate on the net assessed value to the lower $3.50 per $1,000 assessed Residential rate!
Example luxury condotel: Let’s say you are 65 years old by June 30th this year and you bought a nice luxury condotel at the Trump Tower, assessed at $2Mill and you live in it as your principal residence, and you file by 9/30 this year. Effective 7/1 next year, besides the $420 savings per year for a $120K reduction in assessed value, you will drop your tax rate from $12.90 per assessed $1,000 to the lower $3,50 rate per $1,000 assessed. Calculation without vs with home exemption:
- a.) $2Mill gross assessed x ($12.90/$1,000) = $ 25,800 tax without home exemption
- b.) $2Mill – $120K home exemption = $1.78Mill net assessed value x ($3.50/$1,000) = $6,230 tax with home exemption. —> Savings: $19,570 per year.
You see how the savings can be huge if you qualify for the home exemption, but you must file by the deadline.
UPDATE: As of July 2017, to claim the lower $3.50 residential tax rate for your condotel you will need to also file the dedication for residential use.
3.) How do you file?
Click here to download form P-3. Make sure to file by the 9/30 deadline!
Complete the Parcel ID number on the top left corner in the 12-digit format, means skip the first digit #1 (#1 represents Oahu) and include all zeros. If you count the digits from the back with all zeros and you skip the #1 first digit you should have 12 digits. Add “-HEX” at the end (for Home Exemption).
Complete your name, social security number and birthday. Remember you are entitled to a $120K home exemption if you are 65 years or older. Attach proof of age, such as copy of your picture ID.
You only need to file once for as long as you own the property and use it as your primary residence. The tax office should automatically switch you to the larger $120K exemption bracket once you reach age 65, provided you submitted the required proof of age.
Fill in the property address and complete the rest of the form, including: I’m a legal resident of: “USA, Hawaii, Honolulu County”
Do you have a home exemption anywhere else? Yes / No. Remember you can only have one primary residence and therefore you can only claim one home exemption.
Include a photocopy of the form and a self addressed stamped envelope to get a stamped receipt. Make another photocopy for yourself so you know what you mailed in. Instructions are on the back of the form including the address where to mail to.
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