First, Hawaii does not have a sales tax only a general excise tax currently 4%. General Excise tax is not charged on real estate transactions. As a buyer you will not pay tax. The seller will pay conveyance tax as follows:
CONVEYANCE TAX (Chapter 247) - On actual and full consideration paid for the transfer of realty, including leases and subleases, a tax of 10Â¢ per $100 is imposed for conveyances under $600,000; 20Â¢ per $100 for conveyances between $600,000 and $1 million; and 30Â¢ per $100 for conveyances in excess of $1 million. Also imposes a conveyance tax for condominiums or single family residences that do not qualify for a homeowners= exemption: 15Â¢ per $100 for properties valued up to $600,000; 25Â¢ per $100 for properties valued between $600,000 and $1 million; and 35Â¢ per $100 for properties valued at over $1 million. Minimum tax on each transaction is $1.00. Certain exemptions are allowed.
Plus, if you are not a Hawaii resident HARPA withholding may be required. HARPTA is an acronym for the Hawaii Real Property Tax Law. HARPTA is a law, not a tax, a common misunderstanding. The Hawaii law is similar to laws passed by other states (e.g., California) as well as a federal law that applies to non-U.S. citizens. Under HARPTA, an estimate of an owner's capital gains tax that will be due Hawaii is withheld at closing. Prior to the passage of HARPTA, the state had no means of collecting such taxes unless the absentee owner filed a Hawaii income tax return for the year of the sale.
NOTE: Some absentee owners may be exempt from the HARPTA law. However, the fact that an owner may be exempt from the HARPTA law does not also exempt the owner from paying state capital gains taxes that may be due Hawaii. The amount collected under the HARPTA law is 5% of the sales price.
A qualified Realtor can give you an estimate of your closing costs, so you will know how much money you will need to purchase a home in Hawaii.... more