Buying, owning and selling property on Maui comes with the inevitable taxes.
Taxes can’t be avoided. Buyers want to know what their annual property taxes will be. Sellers need to be aware of the taxes involved with selling real estate in Hawaii. Here are some basic things to know about different forms of taxes.
Always consult with a tax or financial professional when you have questions about taxes.
Maui County Real Property Tax
Property taxes are public information in Hawaii and Maui County has a great website where you can learn a lot. Or go in person to their Service Center in Kahului.
Depending on the zoning and the use of your property, you’ll usually be classified into one of these groups. As you can see, the Homeowner rate is the most appealing, which requires that you live in the home and are a resident of Hawaii. You’ll need to apply for this rate and the $200,000 exemption before the end of December.
In addition, you can have more than one tax class on your property. For example, if you are living in your home and doing short term rentals in a cottage, each dwelling will be taxed accordingly. It can get complicated, and it’s best to contact the County Property Tax department directly with those questions.
The State of Hawaii collects a conveyance or transfer tax on the sale of any real property in the state. This generally is paid by the seller from the proceeds of the sale. The rate varies, and is dependent on whether or not the buyer will be occupying the home or not. When selling a home, it’s worth considering what kind of buyer you’re dealing with as it will affect your bottom line.
When selling your Maui property, the government wants to make sure they get their share. There are State and Federal rules that apply, and there will be a withholding of funds during the escrow process to ensure the money is collected. Buyers and sellers will be provided with the appropriate forms for the exemption of these fees if they are eligible, and transaction assistants will explain the details.
If you live in Hawaii, you’re in the best position to sell and pay the least amount of government mandated withholding taxes.
HARPTA: The Hawaii Real Property Tax Act is a withholding tax on sales of HI real estate by non-resident owners. Currently the rate is 7.25% of the sale price. This will be charged to the buyer, if the seller fails to pay it.
FIRPTA: The Foreign Investment in Real Property Tax Act applies to foreign persons when they sell their real estate in this country. For sales between $300,000 – $1,000,000 it’s a 10% charge. Over a $1,00,000 and it’s a 15% charge.