Real Property Tax Talk

Real Estate Agent with Prudential Orchid Isle Properties

Slogging through twelve pages of contractual language and another couple of pages of additional terms is enough to put the most alert buyer sound asleep. Try as I might to insure buyers leave my office with complete recall regarding the terms of their purchase, it’s no surprise that, someplace around page 13, even though we talked about their homestead exemption, mental paralysis prevails. 

Buyers on Hawaii Island often forget that as an owner occupant if they don’t submit an exemption form with the real property tax office before June 30 or December 31st, their taxes could increase. Any previous exemption will end. Truthfully, many don’t even understand the concept of a homestead exemption. Simply stated, owners who occupy their dwellings as a principal residence (and file for the exemption) are not taxed on a portion of the assessed value of their property. Not every state is a homestead state. California, for instance, is not a homestead state. In fact, some local owners have been paying the wrong tax amount for years. The tax payment is included in their house payment so they assume it is correct. 

In this State, each County establishes their own tax rate and exemptions. Taxes are not immediately reassessed upon sale. The basic homeowner’s exemption in Hawaii County is $40,000. No tax is collected on the first $40,000 of the home’s value. Once an owner turns 60, the exemption doubles (up to a maximum of $80,000) and owners who reach 70 before the end each calendar year have an increased exemption entitlement of $100,000.  Homeowners are taxed at a lower rate than other classes of property ($5.55 per thousand instead of $8.10). Additional exemptions are available for those who are blind, deaf, totally disabled or those with Hansens’ Disease. Veterans with a 100% service related disability need only pay the minimum tax (currently $100). The exemption extends to surviving spouses as well. To qualify for additional exemptions, the basic homeowner’s exemption must be filed first.

Remember, if your property was purchased during the first half of the year, you should file by June 30th in order to insure the exemption becomes effective as quickly as possible. Otherwise, you must file by the end of the year. To find out if your exemption is in effect, give the helpful folks at the real property tax office a call. You can also check the County of Hawaii website or call your REALTOR®. Talking taxes today may lead to big savings in the future!


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