Federal Tax Guide for Kailua and Windward Oahu

Federal rules for military households, home sales, and short-term rentals

PCS orders for Marine Corps Base Hawaii families

For service members assigned to Marine Corps Base Hawaii, a move under orders between permanent posts is a permanent change of station. A member of the Armed Forces on active duty who moves because of a permanent change of station can deduct reasonable unreimbursed moving expenses, figured on Form 3903; government-provided moving and storage and excluded allowances, such as dislocation allowances, temporary lodging allowances and expenses, and move-in housing allowances, are not income and are not deductible. If government payments exceed actual moving costs, the excess is generally included in Form W-2 wages. If your spouse and dependents move to or from a different location than you, the reimbursements and services for those separate moves are also excluded. Hawaii is one of the 50 states, so duty in Hawaii is not duty outside the United States and Puerto Rico for the automatic 2-month filing extension described in Publication 3. Free help is available at installation legal assistance offices and through MilTax (Military OneSource). Sources: IRS Publication 3 (2025), Armed Forces' Tax Guide; IRS Instructions for Form 3903, Moving Expenses; Military OneSource, MilTax free tax services.

Short-term rentals: personal-use days

A house or condo that you rent to guests and also use yourself is a dwelling unit with special rules. If you use it as a home and rent it fewer than 15 days in the year, you do not report the rent, and the expenses are not rental expenses. It is used as a home if your personal use exceeds the greater of 14 days or 10% of the days it is rented at a fair price. Personal use includes days used by you, another owner, family members unless they pay fair rent and use it as their main home, anyone under a swap arrangement, and anyone paying less than fair rent. Any personal use requires dividing expenses; if the unit is a home, a rental loss cannot offset other income and excess expenses carry forward (IRS Publication 527; IRS Topic 415). Sources: IRS Publication 527 (2025), Residential Rental Property; IRS Topic No. 415, Renting residential and vacation property.

Short-term rentals and the passive loss rules

Under the passive activity rules, an activity is not a rental activity if the average period of customer use is 7 days or less, or 30 days or less when you provide significant personal services (IRS Publication 925). Guest stays averaging a week or less therefore fall outside the rental category, and the $25,000 special allowance, which applies to rental real estate activities in which you actively participate, is not available. The activity is instead tested under the rules for trade or business activities, so its losses are passive unless you materially participate, for example by participating more than 500 hours, or more than 100 hours and at least as much as any other individual, including people who do not own an interest. Passive losses are figured on Form 8582 (IRS Publication 925). Sources: IRS Publication 925 (2025), Passive Activity and At-Risk Rules; IRS, About Form 8582, Passive Activity Loss Limitations.

Schedule E or Schedule C, and Form 1099-K

Rentals that come with only basic services, such as heat, light and trash collection, are normally reported on Schedule E, Part I. If you provide substantial services primarily for guests' convenience, such as regular cleaning, changing linen or maid service, the income and expenses go on Schedule C, and self-employment tax may apply (IRS Publication 527). Payment apps and online marketplaces must send Form 1099-K when payments for goods or services exceed $20,000 in more than 200 transactions, though they may send one for lower amounts. Whether or not you receive a form, you must report all of the income (IRS Understanding your Form 1099-K). Sources: IRS Publication 527 (2025), Residential Rental Property; IRS, About Schedule E (Form 1040); IRS, Understanding your Form 1099-K.

Leaving Kailua and keeping the house as a rental

If you move away on orders and rent out your Kailua home, depreciation is based on the lesser of the home's fair market value or adjusted basis on the date you convert it, and residential rental property is generally depreciated over 27.5 years (IRS Publication 527). When you later sell, you may still exclude up to $250,000 of gain, or $500,000 on a joint return, if you meet the 2-of-5-year ownership and use tests; if the main reason for an earlier sale is a change in workplace location, a health issue or an unforeseeable event, a reduced exclusion may be available (IRS Publication 523). Members of the uniformed services and the Foreign Service, intelligence community employees, and Peace Corps employees and volunteers serving outside the United States can elect to suspend the 5-year period for up to 10 years while on qualified official extended duty (more than 90 days or indefinite, at a duty station at least 50 miles from the main home or in government housing under orders) (IRS Topic 701; IRS Publication 523). Time on qualified official extended duty, up to 10 years, is not counted as nonqualified use. Gain equal to depreciation allowed or allowable after May 6, 1997 cannot be excluded (IRS Publication 3; IRS Publication 523). Sources: IRS Publication 527 (2025), Residential Rental Property; IRS Publication 523 (2025), Selling Your Home; IRS Topic No. 701, Sale of your home; IRS Publication 3 (2025), Armed Forces' Tax Guide.

Outside the scope of this page

Hawaii general excise tax, state and county transient accommodations tax, and county short-term rental permitting rules are state and county matters outside this page, which covers federal tax rules only.