THE GARDEN ISLAND

By Lester Chang
Posted: Saturday, May 20, 2006 - 10:30:58 pm HST

The Kaua‘i County Planning Commission will begin looking at modifying the county’s comprehensive zoning ordinance to regulate homes that are used as vacation rentals and bed-and-breakfast operations — two types of businesses some critics say have ruined residential neighborhoods and have reduced rental housing opportunities.

The planning commission has scheduled a public hearing at the Lihu‘e Civic Center on Tuesday after the regular meeting to consider amendments to the county’s comprehensive zoning ordinance proposed by county leaders to regulate the vacation rental and bed and breakfast industry on Kaua‘i.

The commission and the Kaua‘i County Planning Department have been asked to review the proposal and to make recommendations to the council.

The council has taken up the matter due to public concerns about the impacts these commercial uses have had on neighborhoods across Kaua‘i.

Critics say visitors who stay at vacation rentals and bed-and breakfast operations create a transitory nature to neighborhoods.

Kaua‘i County Councilmembers JoAnn Yukimura and Jay Furfaro have worked aggressively to fashion legislation to regulate the industries. Visitors stay at these types of visitor accommodations because they are cheaper than staying at hotels.

Related to proposed changes for the bed and breakfast operations:

• Operators can use no more than two bedrooms for their businesses;

• Operators must provide at least one meal to guests;

• Operators must provide one off street parking stall for each guest bedroom;

• In advertising their businesses, operators can use only one sign on their property and it must not be more than three square feet;

• Bed and breakfast operations will not be allowed on properties that have an ohana unit, or an additional dwelling unit;

Related to rules for vacation rentals:

• Operators can use only one promotional signage on their properties that is no more than three square feet;

• Operators can use direct lighting on the signs;

• The signs shall show a permit number for the operation of the vacation rental;

The CZO changes also propose that people who operate vacation rentals prior to the legislation obtain a “non-conforming use certificate” from the county. People operating the bed and breakfast facilities will be subject to review by the county.

Similar conditions also would be imposed on the owners of vacation rentals in the proposed legislation.

Second Home, Vacation Rental or Investment?

By Walt Harvey, 5/10/2006 11:33:51 PM

Hawaii is an attractive location for buying a second home and how you classify that property has significant tax ramifications. Disclaimer: I’m a real estate broker and not allowed to give tax advice so consult with your tax professional regarding your specific circumstances. With that said, here are some guidelines.

A second home is a property other than your primary residence and of course it’s an investment. Any property owned as an investment may fall within the definition of a vacation home. The term vacation home is generic and applies to a property that an individual or family member uses personally to any extent. If there is personal use, tax write-offs may be limited.

14-Day Rule: Vacation homes may be considered residences if used for personal purposes more than 14 days or 10 percent of the number of days during the year for which the home is rented at a fair rental price, whichever is greater. Time spent working on and improving the property is not considered in the 14 day usage.

If a vacation home is rented for 14 days or less during the year and there is any personal use, you can keep the rental income and not report it (Code Sec. 280A(g), however, you can claim no expenses beyond the mortgage interest and property tax.

If rented for more than 14 days, then all rental income must be reported along with deductions for the rent-related expenses like advertising, broker’s fees, utilities, maintenance, upkeep, mortgage interest, property taxes and insurance. Depreciation may be deducted against the rental income however all deductions may not exceed the rental income.

Always consult a tax professional. When considering real estate, consult a real estate professional.