No special tax class for vacation rentals

  • Lisa Miura

HILO — There will be no special property tax classification for short-term vacation rentals under recommendations proposed by a panel tasked with revamping the county property tax code, but some people currently getting tax breaks for agriculture could take a hit.

The Real Property Tax Review Working Group advises vacation rental properties be evaluated based on their “highest and best use,” rather than creating a special class or moving them to the higher-tax hotel/resort class. The counties of Kauai and Maui are the only jurisdictions in the United States that have a vacation rental tax class and special tax rate, according to the panel’s report.


The City and County of Honolulu is currently considering moving vacation rentals into the hotel tax category, according to a Honolulu Star-Advertiser article.

Changes are recommended, however, for the county’s agriculture program that gives breaks to active farms, ranches, nurseries and orchards. The changes, if approved by the council, would go into effect for the 2021 tax year, at the earliest.

A suggested change likely to have the greatest impact is the requirement for a minimum size parcel for those taking the non-dedicated agriculture property valuation benefit. The change would add about $6.5 million to county taxes annually by affecting 3,000 of the 8,400 parcels currently in the program. The affected parcels now pay about $580,000 in taxes.

“We realize these changes are substantial, however, the agricultural programs should provide considerable incentive to farm production at a community level and go beyond a personal sustainable level,” the report states.

Property Tax Administrator Lisa Miura couldn’t be reached for comment by press-time Thursday.

Changes are also recommended for the dedicated agriculture program, where a property owner agrees to stay in the program for 10 years in exchange for a much lower property valuation, thus leading to lower taxes. The working group’s agriculture subcommittee recommends the county add a three-year dedicated program as well, for start-up operations or where there is uncertainty with respect to the long-term viability of a commercial agricultural program.

Currently there is no minimum lot size for the non-dedicated program, while those in the dedicated program must have at least one-quarter acre for intensive agriculture, 1 acre for orchards, 5 acres for feed crops and 10 acres for pasture.

In addition, in order to qualify for the program, a farm plan would be required to ensure there is a viable agricultural activity being undertaken. The property value would be calculated at 30% of the fair market value of the property.

The suggested changes are in response to the increasing gentrification of rural areas of the county and the perception of abuse in a program that was created to support commercial agriculture and encourage agricultural uses in rural areas.

This is the final report for the working group and the agriculture committee, which held about two dozen meetings each over the past two years.


Previous recommendations, some already implemented by the county, included eliminating the solar water tax credit, reclassifying very small agriculture lots to residential and repealing an obsolete residential program.

The council Finance Committee is scheduled to consider the report, Communication 90.1, at its 3 p.m. meeting Tuesday at the West Hawaii Civic Center, with videoconferencing to Hilo council chambers, the Waimea and Pahoa council offices, the old Kohala courthouse and the Naalehu state office building.

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