🌴 Understanding HARPTA: What Kauai Property Sellers Should Know
If you’re selling real estate in Kauai and you’re not a Hawaii resident, you’ll want to understand HARPTA before closing.
What is HARPTA?
- HARPTA stands for Hawaii Real Property Tax Act.
- It’s a withholding tax required when non-residents sell Hawaii real estate.
- HARPTA is not an additional tax, but rather a prepayment of any potential Hawaii state capital gains tax owed.
How Much is Withheld?
- The standard withholding rate is 7.25% of the sales price, not the net gain.
- Example: Selling your Kauai property for $1,000,000? The escrow company must withhold $72,500 unless you qualify for an exemption.
Who Does HARPTA Apply To?
- Anyone who is not considered a Hawaii resident for tax purposes—even if you once lived in Hawaii or own multiple properties here.
- This includes:
- Mainland U.S. residents
- Foreign investors
- Hawaii residents who moved out and no longer file HI state tax returns
Are There Exemptions?
- Yes, you may qualify for partial or full exemption if:
- You are selling at a loss
- You’re a Hawaii resident for tax purposes
- The property was your principal residence
- To claim exemption or reduction, sellers must file:
- Form N-289: to disclose residency or exemption status
- Form N-288C: to apply for a withholding reduction or waiver
How is HARPTA Collected?
- The escrow company withholds the HARPTA amount at closing.
- It is then submitted to the Hawaii Department of Taxation.
How Do You Get a Refund?
- If too much was withheld, you must file a Hawaii state tax return (Form N-15) to request a refund.
- Refunds typically take several months, so plan accordingly.
Why Does This Matter?
- HARPTA can impact your net proceeds from the sale.
- Failing to plan ahead could result in cash flow delays or surprise tax obligations.
Work With a Local Team Who Knows HARPTA
- Our Kauai-based team can help coordinate with escrow, your CPA, and legal advisors to minimize HARPTA headaches.
- 💼 Learn more: Thinking About Selling Your Kauai Property? Here’s What You Should Know
📎 For more information, visit the Hawaii Department of Taxation HARPTA Resource Page.
