Understanding Hawaii’s Conveyance Tax: What Sellers Need to Know…
If you’re selling real estate in Hawaii, it’s important to understand the state’s conveyance tax and how it affects your transaction. This tax is a crucial part of the home-selling process, and knowing how it works can help you plan accordingly. Here’s what you need to know about Hawaii’s conveyance tax.
Background
Hawaii’s conveyance tax was established to help fund state programs that support affordable housing, land conservation, and other community initiatives. The tax applies to most real estate transactions, ensuring that a portion of property sales contributes to the broader well-being of the state. This makes it an important financial consideration for sellers and an essential component of Hawaii’s real estate market.
1. What Is the Hawaii Conveyance Tax?
The Hawaii conveyance tax is a state-imposed tax on the transfer of real property. It applies whenever ownership of real estate changes hands and is based on the sales price of the property. The tax is designed to generate revenue for state programs, including the protection of natural resources and affordable housing initiatives.
2. Who Pays the Conveyance Tax?
In Hawaii, the seller is responsible for paying the conveyance tax. This tax must be paid before the property’s deed can be recorded with the Bureau of Conveyances. While the buyer does not pay this tax directly, it is a cost that sellers should factor into their closing expenses.
3. How Is the Conveyance Tax Calculated?
The amount of conveyance tax owed depends on the sale price of the property and whether the buyer qualifies for an exemption as an owner-occupant. Below is a table summarizing the updated 2025 tax rates:
| Sale Price Range | Standard Rate per $100 | Owner-Occupant Rate per $100 |
|---|---|---|
| Up to $600,000 | $0.15 | $0.10 |
| $600,001 – $1,000,000 | $0.25 | $0.20 |
| $1,000,001 – $2,000,000 | $0.40 | $0.35 |
| $2,000,001 – $4,000,000 | $0.60 | $0.55 |
| $4,000,001 – $6,000,000 | $0.85 | $0.80 |
| $6,000,001 – $10,000,000 | $1.10 | $1.05 |
| Over $10,000,000 | $1.25 | $1.20 |
In this marginal rate system, each rate applies only to the portion of the sale price within that bracket. For example, if a property sells for $1,500,000, the tax is calculated in segments based on the applicable rates for each portion of the price.
If the buyer intends to occupy the home as their primary residence and submits the necessary paperwork, they may qualify for the owner-occupant tax rate, which is lower than the standard rate.
4. How Is the Conveyance Tax Paid?
The conveyance tax must be paid before the deed is recorded with the Hawaii Bureau of Conveyances. The process typically works as follows:
- The escrow company handling the transaction calculates the tax amount.
- The seller signs the required Conveyance Tax Certificate (Form P-64A or P-64B, depending on the circumstances).
- Payment is submitted electronically via Hawaii’s Department of Taxation website or in person at the Bureau of Conveyances.
- Once paid, the deed can be recorded, completing the property transfer.
Final Thoughts
The Hawaii conveyance tax is an essential consideration for sellers, impacting the total cost of closing a real estate transaction. By understanding how this tax is calculated and paid, sellers can better prepare for the sale process and avoid unexpected expenses.
Need Help Selling Your Home?
If you have questions about how the conveyance tax applies to your situation, contact Team Mira for expert guidance. As experienced Kauai real estate professionals, we can help you navigate the selling process with confidence.
