HARPTA Non-Resident Withholding Increased to 7.25%

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Real Estate

Are you a Hawaii property owner who resides out of state?  This increase will affect YOU when you sell! See further info courtesy of Julie Tumbaga of Old Republic Exchange:

HARPTA Withholding to increase to 7.25%

Currently, the Hawaii Real Property Tax Act (“HARPTA”) requires a buyer/transferee to withhold 5% of the amount realized when a non-resident sells Hawaii property. The amount realized is generally the sales price. The buyer/transferee is required to send the withholding to the Hawaii Department of Taxation as a “prepayment” of income tax a non-resident person may owe.

Effective September 15, 2018, the HARPTA withholding rate will increase to 7.25%.

There is no withholding requirement if the seller furnishes a Certification for Exemption from Withholding stating that:

1. The seller is a resident person, or

2. That by reason of a non-recognition provision of the IRC, the seller is not required to recognize any gain or loss with respect to the transfer, or

3. For the year preceding the date of the transfer, the property has been used by the Seller as a principal residence and the amount realized does not exceed $300,000.

Thus, in the case of a non-resident selling property as part of an IRC §1031 tax-deferred exchange, the non-resident exchanger may complete a Certification for Exemption and no withholding will be required except to the extent the exchanger fails to re-invest any of the proceeds in replacement property. In such a case, at the conclusion of the exchange, the Qualified Intermediary will be obligated to withhold on the amount of proceeds that have not been re-invested (i.e. “boot”) and remit the withholding to the Hawaii Department of Taxation.

For more information, contact:

Julie Tumbaga
Vice President | Old Republic Exchange
Regional Sales Executive
808.524.6737 | 877.591.1031