Question

Hawaii Condo what information would you need to estimate rental revenues for the year?

Answer 1

General Information-
1. If I rent out my house or a room in my house, does
that mean I am in business?
Yes. If you receive rental income from renting out part or
all of your house, condominium, apartment, second home, vacation home, or any other residential real property (“real property”) located in Hawaii, then you are engaging in a taxable business activity.

2. If I rent out my house, do I have to pay taxes?
Yes. If you rent out real property located in Hawaii, you
are subject to Hawaii income tax and the general excise tax (GET).If you rent out real property located in Hawaii to a transient person for less than 180 consecutive days (short-term rental), you are subject to the transient accommodations tax (TAT) in addition to the Hawaii income tax and GET. For example, if you rent out your house for one weekend, the gross rental income is subject to the GET and TAT.

3. If I rent out my house to relatives such as my son
and his family, do I have to pay taxes?
Yes. If you rent out real property located in Hawaii to
your relatives, then you are subject to Hawaii income tax
and the GET. If it is a short-term rental, then you are also
subject to the TAT. However, if the accommodation is your relatives’ permanent place of residence, then it is not subject to the TAT.

4. What is the GET?
The GET is a privilege tax imposed on business activity
in the State of Hawaii. The tax is imposed on the gross
income received by the person engaging in the business
activity. Your gross income is the total of all your business income before you deduct any business expenses. Gross
income includes any cost passed on to the customer such as the GET.

5. What is the TAT?
The TAT is a tax imposed on short-term rental activity in
the State of Hawaii. It is imposed on gross rental proceeds from renting transient accommodations in Hawaii. Long-term rentals are not subject to the TAT.

6. What is a transient accommodation?
A transient accommodation is a room, apartment,
house, condominium, beach house, hotel room, suite, or
similar living accommodation rented to a transient person
for less than 180 consecutive days.

7. Who is a transient person?
If a person, including a Hawaii resident, has a permanent home elsewhere or does not intend to make the accommodation being rented a permanent place of
residence, then the person is a transient with respect to the accommodation.

8. My intent was to rent out my house for less than
180 days. What do I do if my tenant stays longer
than 180 days?
If your tenant stays longer than 180 days, you may or
may not be subject to the TAT. It depends on the facts and circumstances of the situation.You are still subject to the GET.

9. If the GET and TAT are imposed on gross rental
income, does that mean that nothing is
deductible?
Most business expenses allowed as deductions on your
income tax return are not deductible on your GET and TAT
returns. For example, the cost of repairs, interest expense,
management fees, utilities, real property taxes, and
insurance premiums are not deductible and are included as gross rental income. A few GET and TAT exemptions are allowed. A list of exemptions is included in the instructions for the GET and TAT returns.

10. What are the GET and TAT rates on rental income?
The GET rate on your gross rental income is 4% (plus
the county surcharge, if applicable).
If you are subleasing real property, you may claim a
deduction of up to 87.5% (0.875) of your gross rental income so that the GET rate on subleases would be the equivalent of 0.5%. See Forms G-71 and G-72 for more information. The TAT rate on your gross rental proceeds is 10.25%.

11. May I charge my tenant for the GET and TAT that I
need to pay?
Yes. Because the GET and TAT are expenses that you
incur by engaging in business, you can charge your tenant
for the taxes that you pay. You may visibly pass on the GET and TAT to your tenant by separately listing the GET and TAT on the bill or lease agreement. If you are visibly passing on the GET to your tenant, consumer protection laws do not allow you to visibly pass on an amount that is more than the actual GET due on the transaction.
You may choose not to visibly pass on the GET and TAT
by charging your tenant a flat fee without separately listing the GET and TAT.

12. Will it make a difference if I visibly pass on the GET
and TAT?
Yes. If you visibly pass on the GET and TAT, then you may
claim certain exemptions and exclusions on your tax returns.On your GET return, you may claim an exemption from gross income for the TAT that is visibly passed on to the tenant. You cannot claim an exemption for the GET that is visibly passed on.
On your TAT return, you may exclude from gross rental
proceeds the GET (including the county surcharge, if
applicable) and TAT that is visibly passed on to the tenant.
If you charge your tenant a flat fee without separately
listing the GET and TAT, you are required to pay the GET
(including the county surcharge, if applicable) and TAT on
the entire amount.

13. Is there a minimum amount of tax I have to pay?
No. There is no minimum amount of tax you have to pay.
If you do not have any gross income to report for the filing
period, just file the periodic tax return with a zero (0) in the appropriate columns.

14. If I am a disabled person and I rent out my house,
am I subject to the GET and TAT?
Yes. However, the first $2,000 of rental income per year
is exempt from the GET. The remaining amount is taxed at the 0.5% GET rate. If you are visibly passing on the GET to
your tenant, consumer protection laws do not allow you to visibly pass on an amount that is more than the actual GET due on the transaction.There is no exemption or reduced tax rate for the TAT.

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