A new bill was introduced to improve the equity and balance within the Kaua‘i property tax system.
Bill No. 2872 would divide vacation rentals and residential investment properties into three tiers: properties valued at up to $1 million; properties valued between $1 million and $3 million dollars; and properties valued at more than $3 million.
We have low property tax rates compared to the mainland. This legislation could help ensure higher value properties are taxed more significantly than less expensive properties. Kaua‘i is the last county in the state to institute some form of tiered taxes.
The County Council members hope that this bill will incentivize some of these property owners to turn vacant homes and transient vacation rentals into long-term rentals, alleviating the housing crisis. The 2020 U.S. Census found that there were 5,445 vacant homes on Kaua’i, accounting for nearly one in five homes on the island.
The bill does not set tax rates for the new tiers, this will be addressed in the fiscal year budgeting process next year. Proponents of the measure also hope it could be used to reduce a sharp bump in tax rates for properties passing the current $1.3 million threshold for residential investors.
Instead of a dramatic increase for properties valued above the $1.3 million threshold, the first million dollars of a property will now be taxed at one rate, the next two million at another rate, and any value above that at a third rate.
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Sean Ahearn & Jim Karlovsky