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Does HARPTA apply to military members?

2/12/2014

5 Comments

 
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A common misunderstanding is the thinking that HARPTA is a tax.  This is a means for the State of Hawaii to collect taxes from absentee owners.  HARPTA stands for Hawaii Real Property Tax Law.

A question that arises from military families is whether HARPTA applies to them.  If an active duty member closes a sales as a primary residence and being transferred from Hawaii under military orders the 5% HARPTA does not apply.  If however the property was rented as an investment then HARPTA would apply.

Here are some other listed exemptions for HARPTA:

EXEMPTIONS FROM WITHHOLDING

1. Transferor furnishes Hawaii Resident Certification. No withholding is necessary if the seller or transferor furnishes to the transferee a properly completed Form N-289 stating (i) the transferor’s federal taxpayer identification number, (ii) address, and (iii) that the transferor is

2. a Hawaii resident. However, this exemption will not apply if the transferee has actual knowledge that the information on the Form N-289 is false. (Note that the definition of Hawaii resident for purposes of the withholding required by HRS §235-68 would include foreign corporations and partnerships which are registered with the Hawaii Department of Commerce and Consumer Affairs to do business in the

State of Hawaii).

3. Transferor’s Affidavit of Principal Residence. No withholding is necessary if the transferee receives an affidavit by the transferor stating (i) the transferor’s federal taxpayer identification number, (ii) that the transferor used the property as a principal residence for the year preceding the date of the transfer and (iii) the sales price for the property does not exceed $300,000.

4. Transferee Receives Hawaii Withholding Certificate.

(a) The withholding under HRS §235-68 may be reduced or eliminated pursuant to a “withholding certificate” issued by the Hawaii Department of Taxation. A withholding certificate may be issued by the Hawaii Department of Taxation upon receipt of Form N-288B establishing that either (i) the transferor will not realize any gain with respect to the transfer or (ii) the transferor will have insufficient proceeds to pay the withholding required by HRS §235-68 after payment of all costs, including selling expenses and the amount of any mortgages or liens secured by the property.

(b) The withholding may also be reduced or eliminated pursuant to a “written agreement” with the Hawaii Department of Taxation. Persons who engage in more than one real property transaction in a calendar year or to whom meeting the withholding requirements are not practicable are eligible to enter into these written agreements.

5. Notice of Non-recognition Treatment. No withholding is necessary if transferee receives from transferor a properly completed Form N-289 stating (i) that transferor is not required to recognize gain or loss with respect to the transfer and (ii) briefly describing the transfer and summarizing the law and facts supporting transferor’s claim. Non-Hawaii residents doing 1031 exchanges of real estate may consider this option to avoid withholding.

5 Comments
company formation hong kong link
3/1/2017 04:14:31 am

It was wondering if I could use this write-up on my other website, I will link it back to your website though.Great Thanks.

Reply
Elliot Lau
2/28/2019 10:02:21 pm

Yes you can as long as you link back to our website. Thanks,

Reply
Yarden Binns
2/28/2019 08:15:09 pm

So what if you're husband got out of the military and we have ETS orders and moved to Alabama but just now we accepted an offer. Does HARPTA apply to us?

Reply
Elliot Lau
2/28/2019 10:04:50 pm

DISCLAIMER: This reply is not offered as legal or tax advice. You are strongly advised to consult with your legal and tax professionals.
A nonresident owner for purposes of HARPTA is an owner who does not file a Hawaii resident tax return. Military members are exempt from the withholding at closing if the sale involves their primary residence and they are being transferred from Hawaii under military orders and a N289 form has been completed.

Reply
Charles Butler
10/19/2019 06:45:30 pm

What option on the form N-289 do I fall under if I am Active Duty and selling my home?


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