Short-Term Rental Taxes in Hawaii: Maui, Oahu, and the Unique Hawaii Tax Structure
Hawaii is one of the most tax-complex states for STR investors. Non-conformity with bonus depreciation, a unique General Excise Tax (GET), high income tax rates, and county surcharges make Hawaii a high-compliance, high-tax environment — but high property values still make cost segregation highly valuable.
Hawaii's STR market is driven by world-class tourism demand — Maui, Oahu (Waikiki and North Shore), Kauai, and the Big Island attract millions of visitors annually and command some of the highest ADR in the world. Property values in desirable areas are extraordinary. Cost segregation studies on Hawaii STR properties can generate $300,000+ in first-year federal deductions on premium properties.
Hawaii's Layered Tax System for STRs
Hawaii's STR tax structure has multiple layers that don't exist in most other states:
- General Excise Tax (GET): 4% (4.5% in Honolulu County) on gross rental revenue — this is passed to guests on top of rent but is technically the landlord's tax obligation
- Transient Accommodations Tax (TAT): 10.25% on gross rental revenue for stays under 180 days
- County TAT Surcharge: Maui County adds 3%, Honolulu adds 3% — these are on top of the state TAT
- State Income Tax: Hawaii income tax rates range from 1.4% to 11% on net taxable income
| Island / County | GET | State TAT | County TAT | Total Pass-Through |
|---|---|---|---|---|
| Honolulu (Oahu) | 4.5% | 10.25% | 3% | ~17.75% |
| Maui County | 4% | 10.25% | 3% | ~17.25% |
| Hawaii County (Big Island) | 4% | 10.25% | 3% | ~17.25% |
| Kauai County | 4% | 10.25% | 3% | ~17.25% |
Hawaii Income Tax on Rental Income
Hawaii's individual income tax is one of the highest in the country, with a top rate of 11% on taxable income over $400,000. The combination of Hawaii income tax (up to 11%), federal income tax (up to 37%), and the 3.8% NIIT can result in marginal rates approaching 52% for the highest-income Hawaii investors.
Hawaii's non-conformity with federal bonus depreciation means cost segregation's year-one impact is significantly reduced at the state level. Federal savings remain fully intact.
Cost Segregation in Hawaii: Still Worthwhile
Despite the complexity, cost segregation is highly valuable for Hawaii STR investors because of the extraordinary property values. A $3M Maui beachfront home might generate $600,000–$900,000 in federal bonus depreciation via cost seg. At 37% federal, that's $222,000–$333,000 in first-year federal tax savings — which more than justifies the state-level complexity and the study fee.
Hawaii STR Regulations
Hawaii has dramatically restricted STRs in recent years, particularly in residential zones. Maui County has effectively banned non-hosted STRs (TVRs — Transient Vacation Rentals) in most residential areas, limiting them to properties with prior nonconforming status or resort/hotel zones. Oahu similarly restricts non-hosted rentals in residential areas. Kauai and the Big Island have their own permitting systems.
Hawaii STR Tax Strategy
Hawaii's complexity is manageable with the right team. Get your free cost segregation estimate and see your federal savings potential.
Get My Free Estimate