One of the saving graces of Honolulu’s exceptionally high value property market is its relatively low property taxes. Compared to many other similar major metropolitan and high value real estate areas, Honolulu has always had low property tax rates, which can be further offset for resident homeowners.
If you’re interested in purchasing a personal palace in paradise, here’s what you should first know regarding property taxes in the local region.
What Is the Current Honolulu County Tax Rate?
Honolulu County’s current tax rate is 0.35%. For every $1,000 a property is worth, the assessment is $3.50. It should be noted that the full tax rate isn’t generally paid by resident homeowners in Hawaii, because homeowners are not taxed on the first $80,000 of a residential property’s value. While an investor will need to pay a total of $700 for a $200,000  ($200,000 multiplied by 0.35%) property, a resident homeowner would only need to pay $420 ($120,000 multiplied by 0.35%) for the same property.
This substantially lowers the effective tax rate. In fact, Hawaii has long had the lowest property tax rates in the nation, at an effective rate of 0.28%. Though in recent years assessed property taxes have gone up, this has been directly caused by property values increasing. The rates have stayed the same — and though increases in property tax rates have been discussed, there have been no serious plans developed to raise them.
What Are the Local and State Tax Rates in Hawaii?
Hawaii assesses its tax rates based on county — but Hawaii is also unique in that each island is an entire separate county. Thus, there are counties for Oahu, Maui, Kauai, and the other islands. Honolulu County encompasses the island of Oahu, and it is the county that has the lowest tax rates throughout the state. Comparatively, Kauai’s rate is 0.425%, Maui’s is 0.575%, and the Big Island (Hawaii) is 0.910%. These rates may change periodically, but have remained relatively static for some time.
Though the tax rates in the less-populated islands may seem high compared to Oahu, their effective tax rates are still fairly low and the tax rates themselves are much lower than other areas of America. In general, property tax isn’t a significant concern for homeowners and home buyers on the island. Not only are a significant amount of taxes removed through mortgage deductions, but they also don’t play a significant role in mortgage acquisition because the rates are simply so low.
How Do Honolulu Tax Rates Compare?
In terms of cost, Honolulu is generally compared to three major markets: Los Angeles, Alaska, and New York City. Of course, this can be a little misleading, as Honolulu County’s market does cover the entire island rather than just the city of Honolulu proper, and Alaska’s high value property market spans the entire state. Nevertheless, Honolulu compares incredibly favorably to these markets — and, in fact, all markets within the nation.
In Los Angeles, the average effective property tax rate is 0.79%, which is over twice that of Honolulu. The actual property tax rate is 1.0%, which is the rate that is paid before any deductions or exemptions. But even with these exemptions, the property tax rate is considerably higher.
In Alaska, the average effective property tax rate is 1.23%. Though not all areas in Alaska actually utilize property taxes, the areas that don’t have high sales taxes, instead. Most of the major areas in Alaska do have property taxes.
Finally, in New York City the effective property tax rate is 0.72%, which is lower than New York’s statewide average of 1.5%. Nevertheless, it’s still double Honolulu’s effective tax rate.
But Honolulu doesn’t need to be compared to the major markets, it can also be compared to the nation as a whole. Nationally, the effective average of property taxes is 1.19%, which is significantly more than Honolulu. There is no state that has a lower effective property tax rate than Hawaii. The closest state is Alabama, with an effective tax rate of 0.43%. Los Angeles is the high value market that comes close to Honolulu and it still doesn’t quite approach the rock bottom rates.
In many areas where property tax rates are very low or nonexistent (such as Alaska), it’s compensated with a higher sales tax. In Hawaii there is no sales tax, just a general excise tax on all goods and services at an effective rate of 4.25%. This can be compared to the sales tax rate in Alabama, which is 8.97%.
The easiest way for a prospective buyer to learn more about property taxes is to look up a property at the office of the Honolulu County Tax Assessor. As you consider individual properties for purchase, you can use the tax assessor’s tool to identify the property’s historic costs. Just keep in mind the fact that the property taxes will go up with each assessment of the property.
For the most part, however, Honolulu property tax rates remain quite reasonable compared to other similar markets, and are low enough to be mostly negligible when considering the purchase of a property.
2 Point Highlight
One of the saving graces of Honolulu’s exceptionally high value property market is its relatively low property taxes.
Hawaii has long had the lowest property tax rates in the nation, at an effective rate of 0.28%.
