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:
The home exemption amount you may claim depends on your age by June 30th prior to the September 30th filing deadline, and taking effect July 1st the following year.
Update: The brackets are now staggered as follows:
- $100,000, if you are below age 65. – This is the standard home exemption amount.
- $140,000, if you are age 65 to 79.
- $160,000, if you are age 80 to 84.
- $180,000, if you are age 85 to 89.
- $200,000, if you are age 90 or above
However, the last three home exemption brackets for owners age 80 and older are also subject to a) re-applying every 5 years (!), and b) subject to “low-income” limits as per Section 8-1 0.20(a). “Low-income” means the annual income of the household can not exceed 80% of the area’s median income for the county as established and updated annually by the US Dept of HUD.
This new city ordinance CO-19-7 and several others lately tend to include some trip wires to automatically revert to a more favorable tax revenue default setting.
Important: If you are 80 years or older and you forget to re-apply every 5 years, you will automatically drop back down into the lower $140,000 home exemption bracket. — Be in the know and mark your calendar to re-apply again in 5 years from now.
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 $760,000 net assessed value ($900K – $140K = $760K). At the $3.50 rate per $1,000 assessed value this will save you $490 per year compared with having 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’ (applies to residential properties assessed at $1Mill and above, without home exemption): UPDATE: new tax rate as of 7.1.2019:
$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.
$10.50 per $1,000 (1.05%) of the net taxable value for Oahu homes and condos assessed above $1Mill that have not filed for the home exemption.
· Hotel and Resort: $ 13.90 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 is almost 4 times the regular rate), unless you apply for the dedication for residential use.
Filing the home exemption will not only get you the $100K or $200K 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 $490 savings per year for a $140K reduction in assessed value, you will drop your tax rate from $13.90 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 ($13.90/$1,000) = $ 27,800 tax without home exemption
- b.) $2Mill – $140K home exemption = $1.86Mill net assessed value x ($3.50/$1,000) = $6,510 tax with home exemption. —> Savings: $21,290 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?
UPDATE: You may now file directly online.
Or, 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 larger home exemption than the standard $100K if you are age 75 or above. That’s why you will need to attach proof of age, such as copy of your picture ID.
You will need to file again with attached proof of age when you enter the next age bracket. The tax office will no longer automatically switch you to the larger home exemption bracket. Go figure.
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.
That is our tip of the day.
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