HARPTA

We have helped hundreds of sellers reduce/waive HARPTA at closing and obtain their HARPTA withholdings soon after closing. 

We would love to discuss your situation as you could qualify for either one of the following:

The Hawaii Real Property Tax Act (HARPTA) requires all sellers of Hawaii property who are NOT residents of Hawaii (non-resident), to have 7.25% of their gross sales price withheld and remitted to the state. HARPTA presumes every seller is a non-resident and the full 7.25% will be withheld unless proof it provided, of either:

Hawaii enacted the Hawaii Real Property Tax Act to ensure they receive any taxes owed on your sale. It can be a huge surprise to non-resident sellers. The withholding is based on the gross sales price, not the net sales proceeds or gains. As an example, on a $1million home sale you would receive $72,500 less in net cash proceeds. 

If HARPTA is withheld, sellers may receive back some of the withholdings depending on their tax calculations:

Hawaii income tax return for the year of sale is required even if an above certification and/or application was also filed. 

HARPTA - Q&A

Question: What is HARPTA?

Answer: HARPTA stands for the Hawaii Real Property Tax Act. It requires sellers who are not Hawaii residents to have taxes withheld and remitted to the state of Hawaii within 20 days after the sale of a Hawaii real property interest, except in limited circumstances. 

Question: How much is required to be withheld at closing? 

Answer: 7.25% of the amount realized, which is usually the gross sales price, is required to be withheld, unless a certificate of withholding is approved beforehand to waive or adjust the withholding.  

Question: Who is responsible to withhold HARPTA? 

Answer: The buyer is responsible for deducting, withholding, and paying the tax to the state of Hawaii. The buyer must assume the seller is not a Hawaii resident, unless the seller provides a form N-289 Certification of Exemption from the Withholding of Tax on the Disposition of Hawaii Real Property.

Question: When is HARPTA not required to be withheld? 

Answer: In limited circumstances, HARPTA is not required to be withheld. Circumstances include the seller verification of Hawaii residency through form N-289 Certification of Exemption from the Withholding of Tax on the Disposition of Hawaii Real Property or the property was the seller's principal residence valued less than $300,000. Other circumstances include those specifically where gain/loss is not recognized by tax law or treaty. 

Question: Who is NOT a Hawaii resident? 

Answer: A person that is only temporarily in Hawaii and does not make Hawaii their true, fixed, permanent home (domicile) is not considered a Hawaii resident.

Question: If I (seller) am in the military and being ordered out of Hawaii, does the buyer still have to withhold HARPTA from my sales proceeds? 

Answer: Yes, if the seller is not a Hawaii resident or if the seller's property was a principal residence valued for more than $300,000 than HARPTA should be withheld. 

Question: I am not making any profit from the sale, does the buyer still have to withhold HARPTA from my sales proceeds?

Answer: Unfortunately, yes. HARPTA applies even if there is no profit. However, a seller can file a form N-288B Application for Withholding Certificate for Dispositions by Nonresident Persons of Hawaii Real Property Interest to apply for waiver or reduced HARPTA withholdings less than 7.25% of the amount realized. 

Question: My property was obtained through (1) Inheritance (2) Community Property (3) Gift (4) 1031 exchange. What to do?

Answer: Let's discuss! These situations have many factors that will determine your process options.

Question: Where can I find more information on HARPTA?

Answer: Please give us a call or email to discuss your unique situation, whether HARPTA applies, and your options as a seller to waive, reduce or receive back as quickly as possible any HARPTA withholding requirements. Although not recommended due to the short timeframe to file a waiver or reduction before closing and receiving back an early refund, if you would like to file a form N-288B and/or N-288C please refer to the department of tax forms.