Renting out your house in the state of Hawaii involves several different taxes, term restrictions from more than one source and unusual income calculation methods that vary to one tax to the next. Before you rent your home, know where you must register, what license, if any, is required for renting, how to file for all the applicable taxes and what income is taxable in each situation.
Renting your home in Hawaii is considered a business. Like every form of business income, once the expenses of operating your rental property have been deducted from your rental income, the balance is taxable for state and federal income tax purposes. Even if you show a net income loss, you must file a Hawaii income tax return.
The general excise tax, sometimes called the gross income tax, is imposed on businesses in the state of Hawaii. A business pays the general excise tax based on its Hawaii gross business income excluding any transient accommodation tax that has been passed along to the renter. You must register for this tax by submitting a basic business application to the Hawaii Department of Taxation. Even renters who stay more than 180 consecutive days must pay the general excise tax. If you charged any penalties or fees for late payments or a broken lease agreement, report it on your general excise tax as other income
The transient accommodation tax, or TAT, may be due if you rent your house for less than 180 consecutive days to a transient person. The renter, even if a Hawaii resident, is considered a transient if he has another permanent place to live and does not intend to make your rental his primary residence. The TAT is based on gross rental income, not including any transient accommodation taxes passed on to the renter or any penalties charged the renter for late payments or breaking the lease. The properties subject to this tax include apartments, condominiums, hotel rooms/suites or houses, for instance. You must register for this tax by submitting a basic business application to the Hawaii Department of Taxation.
Any money you collect as rent is part of your gross income. Even if you rent only a room of your house, the income becomes a part of your gross income for tax purposes. In addition, if you received any goods or services in return for providing the rental property, their value services should also be included in your gross income for tax purposes. For instance, if a renter does the yard work or walks your dog while renting your home, you must add the value of the renter's service to your gross income.
In the 1980s, Honolulu restricted short term rentals. Anyone renting a home for less than 30 days must obtain a permit. Many rental managers creatively circumvent this requirement be leaving a 15-day gap before and after a rental that lasts less than 30 days. The law simply requires a 30-day window.
If your property is subject to homeowner association rules, research whether your homeowner association stipulates a minimum term for renting your home on a short-term basis. Some homeowners associations require at least one-, three- or six-month rental terms, for instance.