If you are a non-resident of Hawaii, you will need to pay withholding of HARPTA on the sale price of your home. The State of Hawaii Department of Taxation has announced that the rate will increase from 5% to 7.25% of the sales price for the withholding of tax on the sale of Hawaii properties by non-Hawaii resident persons/entities on or after September 15, 2018. This withholding is commonly known as “HARPTA”. Its not a tax on the sale but the amount withheld from the seller’s proceeds from which a possibly tax due the State of Hawaii on a gain is paid. And if you are foreign buyer, you will also need to pay FIRTPA witholding when you sold your house. The increase was anticipated since the Federal government increased “FIRPTA” (withholding for foreign sellers) from 10% to 15% effective for closings on or after February 16, 2016.
Occupancy of a home in the city for more than 270 calendar days of a calendar year; registering to vote in the city; being stationed in the city under military orders of the United States; and filing an income tax return as a resident of the State of Hawaii, with a reported address in the city. Your ownership must be recorded at the Bureau of Conveyances on or before September 30th proceeding the tax year for which such exemption is claimed. If you are a lessee with a lease that has a term of five or more years and the parcel is used for residential purposes, the lease and any extension, renewal, assignment or agreement to assign the lease has been recorded at the Bureau of Conveyance, and the lessee agrees to pay all real property taxes during the term of the lease, you may qualify for the home exemption.