Our Confusing Transfer Tax

Every state levies a transfer tax when real property (land or homes) sells. Hawaii is no exception. The only difference is that the Hawaii tax can be extremely confusing.

Factors Affecting Tax Rates

No surprise there, right? Not only are taxes based on the sales amount, but there is also a surcharge related to the buyer’s intended use. When a buyer will not qualify for a homeowner’s exemption, the tax is higher. This means all vacant land transfers and any non-owner occupied homes are taxed at a higher rate. Conveyance taxes are a seller’s cost and yes, you read correctly, the seller’s tax is partially based on the buyer’s intended use. For this reason, our standard contract specifies that a buyer must inform the seller if their intended use changes. As mentioned, this is only the first part of this tax equation.

Determining the Tax Amount

The sales amount must also be considered. Some escrow companies have a calculator that estimates the amount due, but because it’s so complicated, it may be best to rely on an astute REALTOR® to save you money. When a sale is under $600,000 the rate is 10 cents per hundred if the buyer qualifies for a homeowner’s exemption (not all states are homestead states, so ask your agent if this is not clear).

This would mean that the tax on a $599,000 home would be $599 with a qualifying buyer. If not, the tax will be $898.50. No big deal at this point. As the scale increases, it often makes sense to reduce the home price by just $1000 to save more than the tax scaled amount.

Understanding the Savings

Let’s take a home selling for $6million. The amount with a qualifying buyer would be $54,000 (without $66,000). By adjusting the amount only $1000, these amounts would be $42,000 (rounded) and $51000. This means that a $1000 adjustment would save the seller about $22,000 (qualifying buyer).

Tiers adjust 7 times (see also HRS Chapter 247) so be sure to ask your REALTOR® for a careful analysis (and now the State wants to change it again).

Eligibility for Homestead Exemption

I’m often asked what determines if a buyer is eligible for a homestead exemption. In Hawaii County, the form simply asks if you will be filing a State income tax return the following year.  Qualified owners should apply immediately upon closing.

Consider All Costs

So, when buying or selling, consider all costs. Knowing the nuances can make a huge difference in what a seller receives and is therefore willing to accept for their property!

About the Author

Denise Nakanishi

Denise Nakanishi is a REALTOR Broker with Hawai'i Life. Denise Nakanishi is one of Hilo's most acclaimed real estate agents. She reached the rank of Major in the US Army and is now known by many as "Major Mom." The nickname fits–not only does Denise bring the discipline and mission-oriented attitude you'd expect, she's also caring and compassionate, always looking out for her clients like they're her own family. Having made the Big Island her home since 1987, Denise combines her extensive knowledge of the area with a sharp focus on customer service and the results speak for themselves. She's the recent recipient of the Best East Hawai`i, Best of Zillow, Chairman's Circle Award, President's Circle, Top Producing Agent since 2001, and Realtor of the Year awards. Denise stays ahead of the curve because she's passionate about education–she served as Education Chair for Hawaii Island REALTORS® for many years. She's one of Big Island's best real estate resources, known for her weekly article in the Hawaii Tribune Herald. Denise leads Team Nakanishi for Hawai`i Life, who is committed to their family, work, and community. In her little time away from work, Denise is a committed runner and Grandy. She also devotes many hours to various Veterans' Organizations, the East Hawaii Cultural Center, and the Hawaii Island REALTORS®. You can email me at or via phone at (808) 936-5100.

Comments (0) Show CommentsHide Comments (Remember)

Cool. Add your comment...

Your email address will not be published. Required fields are marked *

Leave your opinion here. Please be nice. Your Email address will be kept private, this form is secure and we never spam you.

More Articles from Hawaii Life