Big Changes Ahead for Big Island Agricultural Property Taxes – What You Need to Know!Big Changes Ahead
Big Island Agricultural Property Tax Changes
In 2023, the Hawaiʻi County Council introduced changes to the property tax system aimed at ensuring only genuine agricultural producers benefit from the agricultural property tax programs. These changes address “gentleman farmers” who claim significant tax benefits without producing meaningful agricultural output. Planting a few papayas or keeping a couple of animals as pets will no longer qualify for agricultural tax breaks.
These updates offer both positive and challenging aspects for agricultural property owners. Here’s a breakdown as of October 2024.
The Good News: Agricultural Tax Benefits and Homeowners Exemption
“Under the new property tax assessment for agricultural properties, confined animals, aquaculture, and beekeeping are now grouped into a single agricultural category, previously classified under Intensive Agriculture.”
Previously, owners of agricultural-zoned land who benefitted from agricultural tax programs couldn’t claim a homeowners exemption on the same property. This changed with the 2023 ordinance. Now, some property owners can enjoy both the agricultural tax benefit and a homeowner exemption, leading to lower tax bills for eligible properties. However, not all properties will qualify; properties used for hosted or non-hosted short-term rentals, long-term rental units not under affordable housing programs, or properties without continuous, active agricultural use are excluded.
The Bad News: Stricter Requirements for Agricultural Tax Programs
The revised tax system introduces three agricultural program options, with the former Non-Dedicated Agricultural (NDA) program gradually being phased out. For those previously enrolled in NDA, there’s a grace period for transitioning to the new programs.
The Three New Programs:
Short-Term (3-Year) Dedicated Agricultural Program: Property owners commit to agricultural use for three years, providing verifiable proof of activity, such as a farm plan, USDA organic certification, or $10,000 in receipts for farm investments.
Long-Term (10-Year) Dedicated Agricultural Program: This option is similar to the short-term program but requires a longer commitment. It offers a greater tax benefit, with values set at 50% of the short-term program’s rates (e.g., fruit orchards at $1,500/acre vs. $3,000/acre in the short-term program).
Community Food Sustainability Program: Designed for properties on the east side of the Big Island where the assessed agricultural value exceeds market value, this program sets assessed values at 30% of market value. Note that eligibility still requires documentation of agricultural activity.
“Landowners with free-range herds of cattle may now qualify for the Pasture and Grazing rates under the new County of Hawaii agricultural programs.”
In practical terms, under the 3-year program, the assessed value for dedicated use may be around $25,000 on a property assessed at $480,000. Opting into the 10-year program could further reduce that to $12,500, cutting the tax liability by half.
The new requirements make it clear that only properties with verifiable agricultural use will enjoy reduced tax assessments, ensuring that Hawaiʻi’s agricultural tax benefits go to true producers.
For more information, here are links to the County of Hawaii Real Property Tax Office website:
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