October 25, 2021
This past March a new tax benefit went into effect for property owners in Maui County to incentivize long term rental use and help curb our ever-present shortage of residential rental housing. If you own a long term rental property with a 12-month or longer tenant in place, then you're eligible to apply for a tax savings of up to $200,000 off the assessed value and a tax rate significantly lower than that of the non-owner occupied property tax classification. Want to save money on your Maui property taxes? Here are the specifics:
First and foremost, you can only qualify for one long term rental exemption per property according to the Maui County FAQ's. Even if you have multiple legal rental units and multiple leases in place, $200,000 is the max exemption per property as long as no part of the property is used for short term rentals.
Houses and condo units are equally eligible to apply for this exemption. The only restriction is that if any part of your property is classified as commercial use then that portion is not entitled to the exemption.
Here's an extra neat benefit... If you're an owner-occupant with an active homeowners exemption and have an ohana unit on the property rented to a 12-month tenant, then you're eligible for a $100,000 long term exemption in addition to your existing $200,000 homeowners exemption! That's a total of $300,000 off the assessed value of your property plus the ultra low owner-occupied tax rates.
Here's how to sign up:
- Download the PDF Application Here
- December 31st is the filing deadline for the exemption to kick in at the start of the next fiscal year July 1. Get those applications in by the deadline or your exemption won't be processed until the next tax year!
- A valid 12-month or longer lease to the same tenant must be submitted with the application. 6 month or month-to-month leases are NOT eligible.
- You must reapply EVERY YEAR with a fresh 12-month lease. This exemption does not carry over from one tax year to the next.
Another consideration I found interesting...
The Maui County FAQ's clearly state that no, you cannot rent to yourself. But if an LLC rents to you, you would still have to meet the following conditions per MCC 3.48.466 that the dwelling must be occupied as a long-term rental and under a signed contract to lease for twelve months. The real property tax department suggests that if the property is owned by and LLC and you live in it full time, then you rent from the LLC for five or fifteen years to qualify for a homeowner exemption instead.
Got an additional interesting scenario? You can call the Real Property Assessment Division at (808) 270-7297.
Overall, I think this is an outstanding opportunity to save money while you're making money on rental income AND providing much-needed housing for our island residents. If you're eligible, then don't forget to sign up prior to December 31st! Aloha!
