Owning a vacation rental property on Hawaiʻi Island is a rewarding investment—but managing the high costs of ownership is critical to long-term success. Even small tax adjustments can improve your net return
Property taxes, maintenance, utilities, and insurance on the Big Island can take a significant bite out of your rental income. Savvy owners know that optimizing their tax strategy is one of the best ways to improve net return—even small adjustments can add up to big savings. Below are three practical tax tips many Big Island vacation rental owners overlook:
1. Maximize Rental Property Depreciation
One of the most powerful ways to reduce your taxable income as a vacation rental owner is by properly leveraging depreciation deductions.
Common mistakes:
- Failing to depreciate furnishings, appliances, and certain building components..
- Using an incorrect property basis—especially for inherited or gifted homes.
- Missing opportunities for bonus depreciation or accelerated schedules.
Why it matters: Depreciation allows you to write off the cost of your property and eligible improvements over time, reducing your taxable income without affecting your cash flow. This can save thousands of dollars per year in taxes.
Tip: Work with a tax professional experienced in Hawaii vacation rental taxes to ensure your depreciation schedule is fully optimized. This is one of the highest-impact tax strategies available to Big Island vacation rental owners
2. Deduct Travel Expenses and Home Office Costs
Many Big Island vacation rental owners live off-island and frequently travel to Hawaiʻi to oversee property maintenance or manage guest experience. Others self-manage their rentals and coordinate operations from home.
Both scenarios present valuable but often overlooked tax deduction opportunities:
Travel deductions:
You may be able to deduct airfare, lodging, car rentals, and meals when traveling primarily for property-related business purposes.
Home office deductions:
If you operate your vacation rental business from a dedicated space in your home, you may qualify for a home office deduction covering a portion of utilities, internet, and other expenses.
Common mistakes:
- Not tracking property-related travel expenses or failing to document business purpose.
- Missing out on home office deductions because they seem too complicated.
Tip: Keep detailed records of travel and home office use. Many owners can legally deduct far more than they currently do—improving net return without added out-of-pocket costs.
3. Optimize Your Hawaii GET & TAT Reporting
Hawaii's General Excise Tax (GET) and Transient Accommodations Tax (TAT) are complex—and many Big Island vacation rental owners unknowingly overpay.
Common mistakes:
- Paying GET or TAT on personal use of the property (no rental income generated).
- Failing to adjust reported gross income for platform fees, chargebacks, or refunds.
- Using incorrect filing frequency or overreporting taxable income due to poor records.
Why it matters: GET and TAT rates are substantial—overpayments directly reduce your rental property’s profitability.
Tip: Work with an experienced property manager or CPA familiar with Hawaii vacation rental taxes to ensure proper GET/TAT filing. Modern property management software can help automate and streamline this process, protecting your net income.
In Summary: Small Tax Adjustments can lead to a Big Impact for Big Island Vacation Rentals!
Owning a vacation rental on the Big Island can be highly profitable—but only if you manage costs and taxes carefully. Even small tax adjustments—proper depreciation, maximizing deductions, and optimizing GET/TAT reporting—can dramatically improve your vacation home’s net return.
Not sure if you’re leaving money on the table? As part of our expert management services, CoralTree Residence Collection helps Big Island owners maximize both revenue and net income. Learn more about our Big Island vacation rental property management by contacting Matty Gaskill.