Oahu Real Estate Insiders 🏡

Today, a client asked us, "If I own a property on Oahu using an out-of-state company LLC, am I subject to out-of-state withholding tax"

The answer:Yes, you are subject to it. It is actually called HARPTA (Hawaii Real Property Tax Act), and an out-of-state LLC is considered a non-resident person under Hawaii tax law.

1. It is a Withholding, Not an Extra Tax

The most important nuance is that HARPTA is not a separate penalty tax for out-of-state owners. It is a backup withholding system designed to ensure that non-residents pay their state capital gains taxes before taking their money out of Hawaii.  

When you sell the property, the escrow company is required by law to withhold 7.25% of the total gross sales price (not your net profit) and send it directly to the Hawaii Department of Taxation.  

2. Why the LLC Structure Doesn't Bypass It

Yes, that is the answer; however, it is advisable to confirm with your title or escrow company to ensure accuracy.

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Selling your Oahu property as a foreign national comes with tax obligations many overlook. Under FIRPTA, the buyer withholds 15% of the gross sales price for the IRS. Hawaii's HARPTA requires an additional 7.25% state withholding. The good news — exemptions and reduced withholding certificates may apply in certain cases! Planning ahead with the right team can save you thousands. Have you dealt with FIRPTA or HARPTA before? Share below! 🏡 #HawaiiRealEstate #ForeignInvestor