Property Tax on the Big Island

Real Estate Agent with Aloha Coast Realty RB-19501 (Hawaii)
Very interesting article about property tax assessments in the Hilo and Puna areas in the Hawaii Tribune-Herald (you may have to register and after another week or so it will be gone). A couple of quotes:
“Despite declining Big Island real estate values, many landowners are facing higher property taxes — some up 100 percent or more — due to the new way Hawaii County assesses homes, stores and other buildings. Annual tax notices mailed last week reflect a preliminary 12.2 percent — or $3.2 billion — increase in county-assigned property values. That means the county stands to collect an extra $25.8 million for the fiscal year starting July 1. New construction accounts for only 3.3 percent, or $7.1 million of the increase, with the rest attributed to higher property tax assessments.”
But one big question comes to mind: why, if values are down a bit?
Stan Sitko, the county’s newly appointed property tax administrator, maintains the timing is right because previous assessments were low and depreciation excessive. “This year, I took the big step. We recalibrated,” he said regarding how the value of improvements is determined. “Why are our assessed values still coming up when the market is correcting itself?” Sitko asked in an internal e-mail shared with the Tribune-Herald. “Two very good reasons: Our level lagged far behind the market in 2007 and 2006; and the volume of sales may have gone down in 2007, but the prices didn’t radically drop.”
A couple of things to consider: Just remember, owner-occupied properties cannot increase in assessed value more than 3% per year. If your homes are owner-occupied (and you bought more than a year ago) they should not be making any dramatic adjustments. KathyH, since you just bought, they may be making an “on-sale”-type adjustment this year, and next year you’ll be subject to the 3% cap — however, I’d still call them and make sure they are assessing properly. As for not having received it yet — don’t sweat for a while. March 15th (yesterday) was the deadline for the County to mail them — give it a while to get there. Some of us just got them early. Another note — if your house here is a rental and falls below the “affordable housing” rental rates, you can also file for special tax rates that the County gives to homeowners that provide “affordable housing” to renters. You have to provide a copy of the lease and fill out some forms, and its not a huge amount of money anyway, but its worth knowing. In some cases it makes sense. Hypothetical example — you could rent for $1100 a month, but the affordable rental rate for your house is (for example) $1080. If you dropped the rent to $1075, you might save enough in taxes to more than make up for the lost $25 a month. But then your rental expenses would change and that could have income tax implications…so, its not a simple thing, but you should get the info to be informed. Homeowners are also assessed at a lower rate (per thousand) than non-owner occupied properties. Live in your home and you can avoid a lot of property tax. I am not kidding when I say that I pay more in property taxes for one lot in Kapoho than I do on my home and that’s been true for years. Another thing to keep in mind is that (at least for me) the standard homeowner’s exemption is $40,000 but starting in 2005, an additional exemption of 20% of the total assessed value was passed. For example, my exemption is actually almost $70,000 after the 20% was added on. However, this 20% addition may not be law and could be currently granted as a gift from the County Council that they could also take away.

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John Dirgo

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