Low-Income Household Renters Credit Update

The Low-Income Household Renter’s credit was created almost 40 years ago to provide meaningful tax relief to low- and moderate-income households. However, it has not been updated in decades. We desperately need to alleviate the tax burden on renter families struggling to afford housing.

  • Hawai‘i’s families face the highest cost of living the nation. Our residents pay more for shelter than any state in the nation, with 72% of those living in poverty spending more than half of their income on housing.
  • Median rent in Hawai‘i has increased alone by 45% during 2005–2012, approximately three times the rate of inflation during that same time period.
  • Renter households do not benefit from federal or state tax benefits available to homeowners, including mortgage interest deductions or real estate tax deductions. Nor are they able to build equity in a home.
  • Landlords generally pass along costs from the General Excise Tax and property taxes to renters.

Hawai‘i’s Taxes Exacerbate this Struggle

  • Hawai‘i’s working poor families pay higher tax bills than those in all but 3 other states, and the tax rate for low and moderate income households is among the highest in the nation.
  • The poorest taxpayers pay, on average, approximately 13 cents of every dollar of income in taxes, while those earning more than $400,000 pay closer to 8 cents on every dollar of income. Hawai‘i has the second highest taxes on people in poverty.
  • The lack of adequate credits and exemptions means that the personal income tax actually pushes some low-income working families deeper into poverty.

Proposed Adjustments to the Low Income Household Renters Credit

  • The proposed changes to the LIHR credit would increase the credit’s values to make up for ground lost to inflation during decades of neglect. Additionally, they will improve the credit’s structure to implement tax policy best practices, allowing for a gradual credit phase-out as household income increases, and tailoring the credit to better focus on those most in need.