How long does it take to have a home on Kauai?

Today, we focus on Kauai real property tax, thanks to an alert reader who has given us a horrifying account of something so commonplace as buying a home there. How long do you think it takes between buying a home on Kauai and having the “home exemption” effective for real property tax there?

Did you guess 21 months? That’s right, the better part of two years.

Suppose a couple getting on in years, tired of the hustle and bustle in New York, or San Francisco, or Silicon Valley, decides to move to Kauai. They buy a house there and move in October 2017.

To have a home exemption recognized for real property tax purposes in Kauai, an application for the exemption needs to be in by Sept. 30. Darn! The deadline has already passed.

So, the form, when filed, will be in the batch due on Sept. 30, 2018. Exemptions applied for in that batch will be effective for the next succeeding fiscal year, and that year would begin on July 1, 2019.

From October 2017 to July 2019 is 21 months.

What difference does that make? The most favorable property tax classification on Kauai is “Homestead,” currently with a tax rate of $3.05 per $1,000 of net taxable value.

To get that classification, a home exemption must be in place. And, a home that doesn’t qualify for a home exemption and is valued at $2 million or more is classified as “Residential Investor” with a tax rate of $8.05.

That’s right, it would be more than two and a half times the property tax of a homestead. (And if the property is valued at less than $2 million, the classification is “Residential” with a tax rate of $6.05, which is a little better but it’s still almost double the rate of Homestead property.)

But wait, there’s more! If the property tax surcharge amendment passes on the November ballot, the state will be authorized to tax that property even more, as it will now fall into the same classification as homes held by evil, nasty, foreign real estate speculators.

Although it’s unclear what kinds of “investment real property” would be subject to the surcharge, Residential Investor property would surely be included. We don’t know how much the surcharge is going to be, but in the 2017 legislative session the number that appeared in proposed implementing legislation was $7.50.

The $7.50 would be added to the $8.05, making the total tab $15.55, or $31,100 per year on a $2 million property, as opposed to $6,100 that would be due under the Homestead classification.

If we don’t count the state surcharge, the 21 months result in the County of Kauai pocketing $17,500 in extra tax from the elderly couple who have occupied the Kauai house as their home since they bought it. If the state surcharge were in effect, the $17,500 taken would mushroom to $43,750.

Hawaii is supposed to have the lowest property taxes in the nation, but this couple certainly wouldn’t be feeling the love in their situation.

And that doesn’t even include the Conveyance Tax that was paid to the state back in October 2017 when the property changed hands. The rate of tax on a $2 million property is $6.00 per $1,000, so another $12,000 needed to be paid by someone.

All these tax shenanigans are enough to drive folks straight to the airport where they can move to somewhere else with a much better cost of living. Better watch out, because some of our folks are doing just that!

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Tom Yamachika is president of the Tax Foundation of Hawaii.

4 Comments
  1. P. Oda September 2, 2018 4:08 pm Reply

    So, if an existing local homeowner with a homestead decides to sell and then move into another Kauai property that was previously taxed residential or investor class ($2 million property), they are forced to pay 2-3 times homestead rate for a couple years? And if a existing homesteaded property is sold to a non-resident-investor type purchaser, the newbie gets to enjoy paying 2-3 times BELOW the proper rate class while not residing on Kauai full-time. I would think that a homestead to homestead transfer could be offered as long as the transfer occurs within a certain period of time. What about changing the designation on date of sale and interpolating the charge for the rest of the year?

    I get the County wants revenue but at what cost? This needs to be defeated as it is summarized here.


  2. harry oyama September 5, 2018 8:02 am Reply

    Seems like the County and ripoff State is taking advantage of using these “evil foreign investor speculatiion”, which mainly is communist Chinese to rip off local residents including those wishing to move from the mainland to Hawaii.

    That is why I plan to move out of Hawaii and purchase a residence maybe in Arizona.


  3. harry oyama September 5, 2018 4:26 pm Reply

    Is it illegal for owners who rent out apartments require renters to pay for GET taxes? I think it is because its the responsibility of the owners who get interest tax breaks from their property.

    I have seen several listing on Craigslist demanding such payments.


  4. numilalocal September 11, 2018 4:39 pm Reply

    Harry why would it be wrong for landlords to charge tenants GET? I always paid it when I rented.


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