🏡 How Much Can You Really Write Off? The Tax Benefits of Owning a Home in Hawaiʻi

🏡 How Much Can You Really Write Off? The Tax Benefits of Owning a Home in Hawaiʻi

Owning a home in Hawaiʻi isn’t just about having your own slice of paradise—it’s a smart financial move with some big perks, especially when tax season rolls around. From mortgage interest deductions to property tax write-offs and energy credits, there are several ways your home can lower your tax bill. Let’s break down the most valuable homeowner tax benefits and how they apply right here in the Aloha State.

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💰 The Big One: Mortgage Interest Deduction

One of the most significant tax perks of homeownership is the mortgage interest deduction. If you itemize your taxes, the interest you pay on your mortgage may be deductible—up to a limit.

What’s typical in Hawaiʻi?
According to DBEDT housing sales data, the average sales price for a home statewide in late 2024 hovered around $800,000. That means many buyers are financing a large portion of the purchase price. With national mortgage rates averaging around 6.5%, that equates to:

➡️ ~$52,000 in mortgage interest paid in the first year
➡️ Which may be fully deductible if you itemize

📝 IRS Limit: You can deduct interest on up to $750,000 in mortgage debt ($375,000 if married filing separately) for loans taken out after December 15, 2017.

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🧾 Other Tax Write-Offs for Hawaiʻi Homeowners

1. Property Tax Deduction
Hawaiʻi has the lowest average property tax rate in the country—just 0.29%. But on an $800,000 home, that still adds up to over $2,300/year, which may be deductible if you itemize (subject to the $10,000 SALT cap).

2. Mortgage Insurance Premiums (PMI)
If your down payment was under 20%, you’re probably paying PMI. These premiums have been deductible in past years, but check the latest IRS updates or consult your tax advisor to confirm current eligibility.

3. Points Paid on the Loan
If you bought down your mortgage rate by paying points when you closed on your loan, those may be deductible in the year of purchase.

4. Energy-Efficient Home Improvements
Adding solar panels, energy-efficient HVAC systems, windows, or insulation? You may qualify for a federal tax credit up to 30% of project costs, which reduces your tax bill directly—unlike a deduction, which just reduces taxable income.

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🧠 Homeownership vs. Renting: The Tax Advantage

When you rent, you’re paying someone else’s mortgage—with no return and no write-offs. Homeownership, on the other hand, comes with equity growth and tax savings.

And if you sell your home after living in it for at least two of the last five years? You may be able to exclude up to $250,000 (or $500,000 if married filing jointly) in capital gains from your income.

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⚖️ Should You Itemize or Take the Standard Deduction?

To take advantage of most homeowner tax breaks, you must itemize your deductions. In 2025, the standard deduction is:
 • $14,600 for single filers
 • $29,200 for married couples filing jointly

If your total deductions (including mortgage interest, property tax, charitable donations, and more) are higher than the standard deduction, itemizing can save you money.

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📌 Bottom Line

Owning a home in Hawaiʻi isn’t just about lifestyle—it’s about long-term value. From mortgage interest and property tax deductions to energy credits and capital gains exclusions, the IRS gives homeowners serious incentives. In a high-cost market like Oʻahu, those benefits can make a big difference.

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Thinking about buying or investing in real estate on Oʻahu?
We’ll walk you through the numbers, neighborhoods, and the tax-smart ways to make the most of your investment.

📅 Book your free buyer consultation