| This informational site is brought to you by Exchange Accommodators, Inc. Exchange Accommodators, Inc. has provided 1031 exchange intermediary services since 1990. Generally, sellers transacting a 1031 exchange are automatically exempted from the HARPTA withholding. If you have questions on the 1031 process, please phone us toll free at 1-888-440-1031.
Background: HARPTA is a tax withholding imposed by the State of Hawaii when a non-resident taxpayer sells Hawaii real property. The purchaser of the real property has the obligation of withholding 5% of the sales price and remitting this withholding to the State of Hawaii. Escrow companies in Hawaii typically provide this service on behalf of the buyer.
It is important to know that the 5% is not a tax but a withholding intended to encourage the seller to properly report the transaction. HARPTA is just like the withholding on a paycheck. If you have too much withheld, you can apply for a refund. In the majority of cases, the 5% withheld is greater than the actual tax which is usually not greater than 7.25% of the actual profit if you have held the property for more than a year. Other states have similar laws. By filing form N-288C you do not have to wait until the end of the year to receive a refund of overpaid taxes. Even if you file N-288C, you must still report the transaction at the end of the year on the non-resident tax return; form N-15. |
