HARPTA Explained: What Oʻahu Home Sellers Need to Know Before Closing

If you're planning to sell your home on Oʻahu, you’ve probably heard of HARPTA—but what exactly is it, and how does it impact your sale? Whether you're a local homeowner or an out-of-state seller, understanding HARPTA is critical to avoid surprises at closing.

In this blog post, we’ll break down everything you need to know about HARPTA, why it exists, how much it costs, and what you can do to reduce or avoid it legally.

What Is HARPTA?

HARPTA stands for the Hawaii Real Property Tax Act. It’s a state tax law that requires withholding 7.25% of the gross sales price when a non-resident sells real property in Hawaii.

Unlike traditional capital gains taxes, HARPTA is a withholding—not a final tax. It's collected upfront at the time of sale and submitted to the Hawaii Department of Taxation. The seller can then file a Hawaii state tax return to determine if they owe more or are due a refund.

Who Is Considered a "Non-Resident" for HARPTA?

Even if you’re a U.S. citizen, you may be subject to HARPTA if:

• You live outside of Hawaii,

• Your primary residence is not in the state, or

• You don’t file Hawaii state tax returns as a resident.

This is why many Oʻahu real estate transactions include HARPTA withholding—even when the seller is a U.S. mainland resident.

How Does HARPTA Affect Home Sellers on Oʻahu?

When you sell your property, the escrow company is legally required to withhold 7.25% of the total sales price (not the net gain) and send it to the state. This can be a large amount, especially given Oʻahu’s high real estate prices.

For example:

Home Sale Price: $1,200,000
HARPTA Withholding: 7.25% = $87,000

That’s $87,000 withheld at closing—even if you made no profit.

Can HARPTA Be Avoided?

Yes—in some cases, HARPTA withholding can be reduced or waived. Here are the common ways:

1. HARPTA Exemption Certificate

If you’re a Hawaii resident or qualify under specific exemptions, you can apply for a Form N-289 exemption certificate before the closing date. This tells the escrow company not to withhold the 7.25%.

2. Form N-288C: Withholding Certificate

If you can show that your actual gain is less than the withheld amount—or if you’re selling at a loss—you may apply for a reduced withholding amount using Form N-288C.

Important: These forms must be submitted well before closing—processing can take 10–12 weeks.

Timeline: HARPTA & The Escrow Process on Oʻahu

Understanding the HARPTA timeline helps sellers stay ahead of the game:

1. List the Property: Talk to your Realtor about HARPTA implications early on.

2. Submit Exemption or Reduction Forms: Ideally before accepting an offer or entering escrow.

3. During Escrow: If no exemption is granted, escrow withholds 7.25% at closing.

4. After Sale: File a Hawaii tax return (Form N-15) the following year to claim a refund if owed.

HARPTA vs FIRPTA: Know the Difference

Many sellers confuse HARPTA with FIRPTA (Federal law for foreign sellers). Here’s the key difference:

Some transactions require both FIRPTA and HARPTA withholding—especially if the seller is a foreign national.

Pro Tips for Oʻahu Home Sellers

• Consult a CPA or tax advisor early.

• Work with a local escrow company familiar with HARPTA.

• Start the exemption process as soon as you plan to sell.

• Don’t assume you’re exempt—check your residency status.

Final Thoughts

HARPTA can be a major financial surprise for non-resident sellers of Oʻahu real estate, but with early planning and the right professional guidance, you may be able to reduce or even eliminate the withholding.

Whether you're selling a Waikīkī condo, a Kailua beach home, or a property in Kapolei, understanding HARPTA is crucial to maximizing your proceeds and avoiding delays.

Need help navigating HARPTA during your Oʻahu home sale? Consult your Hawaii-based Realtor, escrow officer, or tax professional to ensure a smooth closing process.

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