Kai Ioh | Nov 2025
Hawai‘i County is moving toward one of the most significant updates to rental-related property taxation in years. If you – or someone you know – owns a long-term rental on the Big Island, this is a meaningful shift worth understanding.
For the first time, the County is going to create a dedicated Long-Term Rental (LTR) tax classification for homes rented six months or longer to the same tenant. While the County has not yet finalized the tax rate, it must be announced by June 20, 2026, and the early indicators suggest a more favorable rate than today’s “Residential–investor” category.
Why the County Created This New Class
Our island continues to struggle with limited long-term housing. By separating long-term rentals from short-term rentals and from second homes, the County is signaling a commitment to housing stability. This new class acknowledges owners who provide long-term leases and offers a path to lower property taxes.
How Long-Term Rental Classification Works
To qualify, all units on the property must be rented for longer than 180 days, and owners must apply annually before December 31. You’ll need a current, signed lease.
Properties valued above $2 million (net taxable) are not eligible.
The County also recognizes the realities of property management: if your home is under renovation or actively listed for a long-term tenant, you may have up to 12 months of allowable vacancy with proper documentation.
How This Impacts Your Taxes
Until the new LTR rate is published, most long-term rentals fall under the standard Residential class:
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$11.10 per $1,000 of assessed value up to $2M ( = 1.11%)
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$13.60 per $1,000 above $2M (=1.36%)
If your rents qualify as “affordable,” you may be eligible for the much lower Affordable Rental Housing (ARH) rate, currently around $5.95 – $6.15 per $1,000.
Once the LTR rate is finalized, qualifying owners are expected to see meaningful relief, positioned somewhere between Residential and ARH.
Important: Know the Penalties
If a property is rented for less than 6 months – or even advertised as a short-term rental – the County may remove the classification and impose retroactive taxes plus a 10% penalty.
Make sure your documentation is current, and your use aligns with the program.
Our Recommendation
If you or your clients own long-term rentals, now is the time to prepare:
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Review your lease terms
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File your annual LTR application before December 31
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Maintain proof of renovation or marketing if the property is temporarily vacant
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Be clear that no short-term rental activity is allowed
As the County approaches the 2026 deadline, we expect more updates. Our team will continue monitoring the policy changes and sharing clear, practical summaries.
If you have a property you’d like us to analyze, or need help understanding how these tax changes may affect market value, cash flow, or future planning, we’re here to support you.
