Besides being a resident in the State of Hawaii there are other reasons why someone would not pay the 7.25% HARPTA withholding and they are:
Let’s say you bought a property for $900,000 and the market is on a downswing and you are selling for less than what you bought it for, you can apply during the escrow period to the State of Hawaii for an exemption. This is where the title company really does you a solid because they are filling out the form for the exemption as soon as they can to get the approval from the State. They will ask but you are not guaranteed that you’ll get an exemption.
If you are doing a 1031 exchange you are not subject provided you are buying a property (or properties) that total more than what you are selling for. Keep in mind that a 1031 will defer the gain, kind of like musical chairs. At some point the music stops, you sell the property you have been doing exchanges on and then you pay the Capital Gain.
If your property is held in an LLC, the LLC will act as a Hawaii Resident and they need to be set up correctly. Make sure that you consult with someone who knows what they are doing or they will be no good at all.
You’ll want to make sure that you take action with a qualified and knowledgeable Hawaii tax person. I have a fabulous resource that specializes in HARPTA filings – message me directly and I will send you their information.
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Aloha!
Lynda Gill RS Lic. 63088
Hawai’i Life Real Estate Brokers 808.346.0056
LyndaGill@HawaiiLife.com
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