Brad Konishi, CPA
Tax vs. Withholding: What's the difference?
Updated: Jun 9, 2019
Although I'm not a real estate agent, most of my clients are, and I've heard about reactions their clients (nonresident home sellers) have when they hear about HARPTA.
It's not always a bad reaction, but no one is ever happy about it. Why would they be?
After all, while most reasonable people will dutifully pay the taxes they owe, no one wants the government to hold WAY more than they should be holding.
A Tax is an amount collected by the government that they use for goods and services that we need (and some goods and services that we don't need, but that's a whole 'nother blog post). It's a one way thing.
However, a tax withholding is an amount collected by the government in anticipation of possible future taxes.
If the government collects a $1 in withholding and you really only owe the government 25 cents, it's the government's responsibility to pay you back that 75 cent difference.
You generally don't get back what you pay in tax, but it's possible to get back a piece of your withholding.
As of 9/16/18, HARPTA will be increasing from 5% to 7.25%. Even at 5%, I rarely saw examples where the withholding wasn't sufficient to pay the tax liability.
Typically, the refunds I got for my clients were counted in the tens of thousands.
Although HARPTA is increasing, please know that Hawaii's capital gains tax has not increased in such a long time, I don't even remember when it happened last.
Undoubtedly, the HARPTA is held to gain assurance on the collectibility of capital gains tax, but also general excise and transient accommodations tax as well.
But still, it's really an overcorrection that doesn't serve the nonresident home seller well.
I'm not here to commiserate, though. I'm here to offer solutions. Contact me at 808-737-4412 or email@example.com for a free consultation. We'll show you exactly what we can do for you.