Why Did My Oahu Property Taxes Just Skyrocket?

If you’re like many Oahu property owners, you just received your new property tax assessment in the mail and you may have some questions. Namely, “what’s with the huge increase in my tax bill?!”

As a real estate team, we’ve been fielding many of these calls, so we are taking a moment here to provide a brief explanation.

The Good News: Increases Are Due to Your Property Value NOT Tax Rate!

There are two different ways your property taxes can increase:

First, there could be an increase in tax rates. Meaning, the City and County of Honolulu can increase the tax percentage or rate that they levy against existing properties. Thanks to Resolution 21–62, the Honolulu City Council has decided not to increase tax rates for the Fiscal Budget Year 2021–2022.

So that leaves us to option number two: property values have increased. Because property taxes are a direct proportion of property value — when the assessed value goes up, so do property taxes. The real estate market has been on a tear and as of November 2021 — the median home price for a single-family home has shot up by 30%! So, if you’re seeing a large increase in your Property Taxes this year, it’s a direct correlation to a jump in the assessed value of your property.

Does That Mean That I Can Sell My Home for More Money?

The short answer: yes, you probably could sell your home for more money than any previous year if you put it on the market.

The long answer: the tax assessed value should not be used as an exact measurement of market value. In many cases, the market value of your home will actually be higher than the tax assessed value. This is especially true in a competitive market (like the one we are in) where many buyers are competing for limited housing inventory — pushing prices up. On the other hand, it’s important to note that in most cases the tax assessed value is determined by an appraiser from the Honolulu tax office that never actually sees your home. So, the tax assessed value may also be inflated if your home is in poor condition and the tax assessor uses recently sold homes that are in much better shape to determine your home’s value.

Is There A way to Save on Honolulu Property Taxes?

The most important thing you can do to save on property taxes is to claim your homeowner’s exemption. If you are living in your property for 270 days or more per calendar year — you are entitled to a tax exemption. The standard amount of the homeowner’s exemption is $100,000 (with the exemption amount increase if you are above the age of 75).

With a standard $100,000 exemption, you pay less taxes. For example, if your assessed property value is $900,000 you will only pay taxes on a value of $800,000 (= $900,000 — $100,000). As a standard practice, we remind all our buyer clients to file for this exemption, which can be claimed by September 30th of each year.

If the home is not your primary residence, this homeowner’s exemption does not apply to you. Additionally, your tax rate will increase if the property is not your primary residence.

If the home is your primary residence, the tax rate is $3.50 per $1,000 of assessed value

If the home is not your primary residence, the tax rate is $4.50 per $1,000 of assessed value for homes up to $1,000,000. Then once the assessed value reaches above the million-dollar mark, a rate of $10.50 per $1,000 of assessed value is applied to the excess amount. Meaning, for a $1.6 million dollar investment property the estimated annual taxes are $4,500 ($1,000,000 X 0.0045) plus $6,300 ($600,000 X 0.0105) for a total of $10,800 per year ($4,5000 + $6,300).

But What If I think That My Tax Assessed Value is Too High?

If you think that your assessed property value is too high, which means you’re paying higher property taxes than you should, there is a process to appeal. It’s important to note; however, that the appeal must be filed before January 15th! Additionally, you must be able to demonstrate that your property assessment exceeds market value by more than 10%.

We’ve helped many of our clients pull comparable sales to determine if the appeals process may be worth their time and money, as each appeal costs $50. If you have questions, feel free to reach out to us and check out the City and County of Honolulu website for more information on the appeals process.