Understanding Hawaii’s Transfer Tax: A Quick Guide
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
If you’re selling a home in Hawaii, you may need to factor in the Hawaii real estate transfer tax. This government fee is charged when property ownership changes hands, and it’s a common part of sellers’ closing costs.
In this short guide, we’ll cover transfer taxes, how they work in Hawaii, and what you might owe when you sell. We’ll also outline state and local tax rates, possible exemptions, and other fees that could apply.
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What are transfer taxes?
Real estate transfer taxes are government fees applied when the ownership of a property changes hands. According to the Federal Trade Commission, these taxes are charged at the state or local level when a home’s title — the legal document showing ownership — is officially transferred to a new owner.
The amount you’ll owe depends on where your property is located, as tax rates and rules vary by state, county, and city. Like property taxes and other transaction-based fees, transfer taxes are a way that governments generate revenue to fund public services and infrastructure.
Who pays for transfer taxes?
If you sell your home in Hawaii, do you have to pay a transfer tax? Does the buyer? Ultimately, the responsibility of transfer tax costs depends on the state, county, or city where the transaction is taking place.
In Hawaii, the seller is responsible for paying any transfer taxes, though the amount depends on the property’s sale price and the buyer’s intended use. The buyer must inform the seller in the transaction contract if this intended use changes for any reason.
What are the types of transfer taxes?
Transfer taxes will vary based on the municipality, but generally, they can be broken down by state, county, or city guidelines. Here’s what you can expect to pay in transfer taxes in Hawaii.
State transfer taxes
Hawaii transfer taxes are $0.10 per $100 for transactions of $600,00 or less and up to $1.00 per $100 for conveyances in excess of $10 million.
This tax rate will change based on the property.
Condominiums or single-family homes where the buyer is not eligible for a county homeowner’s exemption will be taxed differently, with rates starting at $0.15 per $100 for transactions of $600,000 or less. This can range to $1.25 per $100 for homes sold at $10 million or higher.
Other transfer fees
In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.
If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.
Are transfer taxes deductible?
Transfer taxes aren’t deductible on your income tax return, but they may still offer some tax relief when it comes to capital gains. Capital gains refer to the profit you make from selling your home and are generally subject to federal taxes.
The IRS allows sellers to treat certain expenses—like transfer taxes—as part of the cost of selling a home. By reporting transfer taxes as selling costs, you can reduce your home’s final sale price and, in turn, lower your taxable profit. This approach can help minimize how much you owe in capital gains taxes, depending on your financial situation.
Transfer tax exemptions
Some sellers in Hawaii may qualify for exemptions from paying real estate transfer taxes, depending on the details of the transaction and when or how the documents were filed. While most property sales involve a transfer tax, the following situations may be exempt under Hawaii law:
- Documents that were signed or executed before 1967
- Documents used to secure a debt or financial obligation
- Documents that correct or amend a previously recorded or filed document
- Transfers between spouses or between a parent and child
- Transfers involving a payment of $100 or less
Estimating transfer taxes for your home sale
To get a clearer idea of what you’ll pocket from your Hawaii home sale, try using HomeLight’s Net Proceeds Calculator. This free tool factors in closing costs like transfer taxes, agent commissions, and repair expenses to estimate your bottom line.
For a more personalized breakdown of your costs, it’s a good idea to connect with a top real estate agent. HomeLight can put you in touch with an experienced Hawaii real estate agent today.
A knowledgeable agent can help you understand how transfer taxes apply to your sale and whether there’s room to negotiate who pays them. Since every market is different, having a trusted expert on your side can make a big difference when it comes to managing expenses and maximizing your profit.
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