Tax Reference
Cash Sale Taxes in Hawaii
Hawaii caps long-term capital gains at 7.25%. Real estate conveyance tax is tiered, with non-residents and non-primary-residence sales taxed at higher rates. Hawaii has stricter rules for non-resident sellers (HARPTA withholding).
State tax summary for Hawaii
Hawaii caps long-term capital gains at 7.25%. Real estate conveyance tax is tiered, with non-residents and non-primary-residence sales taxed at higher rates. Hawaii has stricter rules for non-resident sellers (HARPTA withholding).
Federal rules (apply in Hawaii and every state)
- $250,000 (single) / $500,000 (married filing jointly) primary-residence capital gains exclusion under IRC §121, if you owned and lived in the home for 2 of the last 5 years.
- Long-term federal capital gains rates: 0% / 15% / 20% based on taxable income (assets held >1 year).
- Inherited property gets a stepped-up basis to fair market value at the date of death — most heirs owe little or no capital gains tax on a quick sale.
- Form 1099-S is issued by the title company at closing and reports the sale to the IRS regardless of state.
- Investment property (rental, second home) does NOT qualify for the §121 primary-residence exclusion. 1031 exchange may defer gains for investors.
Common questions
Does Hawaii tax capital gains on a home sale?
Yes. Hawaii taxes capital gains as part of state income tax — maximum 7.25% on long-term capital gains. Federal capital gains rules apply on top of this.
What is the real estate transfer tax in Hawaii?
Hawaii: $0.10–$1.25 per $100 (tiered by price; higher tier for non-resident/non-occupant). Customarily paid by the seller (by custom). Cities and counties may impose additional transfer taxes.
Do I owe capital gains tax on selling my primary residence?
Most likely no, if you qualify for the federal §121 exclusion: $250K (single) / $500K (married) gain excluded if you owned and lived in the home for 2 of the last 5 years. State rules vary — see the table above for your state. If your gain exceeds the exclusion, you owe federal cap gains plus state cap gains where applicable.
How are inherited homes taxed when sold?
Inherited property gets a stepped-up basis to fair market value at the date of death. If you sell soon after inheriting, your gain is just the difference between the sale price and the date-of-death value — usually small, often zero. This is one of the most generous federal tax provisions for sellers of inherited property.
What is the difference between transfer tax and capital gains tax?
Transfer tax (also called documentary stamp tax, conveyance tax, or deed tax) is a fee paid at closing to transfer the deed — it's a transaction tax, regardless of whether you made or lost money. Capital gains tax is paid on the profit from the sale (sale price minus original cost basis minus improvements). Many states have one but not the other.
Does selling for cash to an investor change the tax treatment?
No — the tax treatment depends on the type of property and how long you owned it, not the type of buyer. Cash sales are reported the same way as financed sales. The title company still issues a Form 1099-S to the IRS.
Selling for cash in Hawaii? We handle the closing.
Our title company handles all transfer tax filings and 1099-S reporting at closing. No surprises.