Demystifying Hawaii Excise Tax: An Overview for Our Clients

As a property owner in Hawaii, you may have come across the term “excise tax.” In this article, we aim to demystify what excise tax is, who it applies to, and the applicable tax rate for our valued clients who own rental properties in the Aloha State.

What is Excise Tax

Excise tax is a type of tax imposed on certain goods, services, or activities, rather than on income or property. In Hawaii, the General Excise Tax (GET) is applied to various transactions, including the rental of real property. Unlike an income tax that is based on profits, the excise tax is often considered a transactional tax, impacting the gross income generated from specific activities.

The standard GET rate in Hawaii is 4.5%. However, it’s important to note that some specific counties may impose an additional surcharge, bringing the total tax rate to 4.712% for the state of Hawaii and 4.166% for the counties of Maui, Kauai, and Hawaii.

It’s crucial for property owners to be aware of the applicable tax rates to accurately calculate and fulfill their excise tax obligations. The tax is typically assessed on the gross rental income, making it important to consider this when managing your property finances.

Who needs to file and pay Excise Tax?

For our clients who own rental properties in Hawaii but are not residents of the state, the GET applies to your rental income. Nonresidents earning income from renting out real property are subject to this tax. Whether you own a vacation home, condominium, or other rental properties, understanding your excise tax obligations is essential to remain compliant with Hawaii’s tax laws.

When to file

Hawaii’s GET is filed and paid on a semiannual basis, covering two periods: January 1st to June 30th and July 1st to December 31st. To stay compliant, mark your calendars with the following deadlines:

1. For the January 1st to June 30th period, file and pay by July 20th.

2. For the July 1st to December 31st period, submit your tax documents and payment by January 20th of the following year.

Missing these deadlines may result in penalties and interest, so it’s crucial to stay on top of your tax responsibilities.

Navigating Hawaii’s excise tax requirements as a nonresident property owner doesn’t have to be daunting. With this guide, Dimov Tax aims to empower you to fulfill your tax obligations accurately and on time. If you have any questions or need assistance along the way, please don’t hesitate to reach out to us at the contact box below. We’re here to help ensure a smooth and compliant excise tax process for your Hawaii rental property.