Taxes on Selling a House in Hawaii

Capital gains tax

You’ve likely heard the term “capital gains tax,” but what is it?

When you sell your home for more than its adjusted cost basis, the profit is known as a capital gain. To calculate it, combine your original purchase price with the cost of eligible capital improvements, then subtract that total and any qualifying selling expenses from the sale price. The amount left over is your capital gain, but whether you owe taxes on it depends on your individual circumstances.

Suppose you bought your Hawaii home for $550,000 a few years ago, invested $45,000 in qualifying improvements over the years, and sold it today for $775,000. If your selling expenses totaled $30,000, your adjusted cost basis would be $595,000, while your proceeds after selling expenses would be $745,000.

Subtracting your adjusted cost basis from those proceeds leaves you with a capital gain of $150,000. You may qualify for tax exclusions or other adjustments that reduce the amount subject to tax, depending on your circumstances.

State capital gains tax

Hawaii generally taxes home-sale profits as part of your taxable income, using regular individual income tax rates ranging from 1.4% to 11%. However, eligible taxpayers may qualify for an alternative tax calculation that applies a 7.25% rate to qualifying net long-term capital gains if it results in a lower tax bill. Long-term capital gains are profits from selling assets you’ve owned for more than one year, including a home.

You may qualify for a home-sale tax break if you owned and lived in the property as your main home for at least two of the five years before selling. If you qualify, you could exclude up to $250,000 in profit from taxes, or up to $500,000 if you’re married and file a joint tax return.

Federal capital gains tax

Meanwhile, at the federal level, capital gains are classified as either short-term or long-term.

• Short-term capital gains: When you sell an asset you’ve owned for one year or less, the profit is considered a short-term capital gain. The IRS taxes it like your regular income, using the tax rate that applies to your income level.
• Long-term capital gains: When you sell an asset you’ve owned for more than one year, the profit is considered a long-term capital gain. The tax rate depends on your income, and eligible home sales may qualify for an exclusion that reduces or eliminates the taxable gain.

2026 short-term capital gains tax brackets

2026 long-term capital gains tax brackets

As mentioned, it’s possible to have your capital gains excluded at the federal level, assuming you qualify. The maximum amount of capital gain that can be excluded is $250,000 for single filers, and $500,000 for a married couple that is filing jointly.

If you don’t meet all the IRS requirements for the full home sale exclusion, you may still qualify for a partial exclusion. The IRS allows this when the main reason for selling your home is a change in your workplace location, a health-related reason, or an unforeseen circumstance, such as the death of a homeowner.

How to report your Hawaii capital gains taxes

• For your federal return, report your capital gains and losses by using the U.S. Individual Income Tax Return (IRS Form 1040) and Capital Gains and Losses, Schedule D (IRS Form 1040).
• For your Hawaii capital gains, use Form N-11 (or Form N-15 if a nonresident).

Transfer tax

Transfer taxes are fees charged when ownership of a property changes hands, helping state or local governments collect revenue from real estate transactions. They’re usually calculated as a percentage or set amount based on the property’s sale price or other value used by law, rather than the seller’s profit.

In Hawaii, this tax is called the conveyance tax, and the rate depends on the property’s value and, in some cases, whether the buyer qualifies for a county homeowner’s property tax exemption.

The state’s standard rates range from $0.10 to $1 per $100 of the sale price, depending on the property’s value. For a condo or single-family home where the buyer isn’t eligible for a county homeowner’s exemption, rates range from $0.15 to $1.25 per $100. The rate increases as the property’s value rises.

The seller or transferor is generally responsible for paying Hawaii’s conveyance tax. The tax payment and required form must be submitted within 90 days of the transaction.

Property tax

Property tax is a yearly fee homeowners pay to help fund community services, including public schools, road maintenance, parks, and emergency response services. They’re calculated by multiplying a property’s taxable assessed value (the value set by the local tax assessor after applicable exemptions) by the tax rate for its property type.

In Hawaii, property taxes are set and collected by the four county governments, not the state, and the rate depends on the property’s location, classification, and taxable value. For example, for the 2025–2026 tax year, Honolulu’s standard residential rate was $3.50 per $1,000 of net taxable value, while Maui’s owner-occupied rate started at $1.65 per $1,000.

Property tax payment deadlines vary across Hawaii’s counties. In Hawaii County, payments are due in two installments each year, on August 20 and February 20. When a home is sold, property taxes are typically prorated at closing so the seller and buyer each cover their share based on how long they own the property during the tax period.

Refer to the Hawaii Department of Taxation to know more about taxes specific to your location.

Inheritance tax

In Hawaii, receiving a home through inheritance generally doesn’t mean you’ll pay inheritance tax, since the state doesn’t have one. However, before putting the property up for sale, check whether there’s still a mortgage to pay off, outstanding property taxes, or any liens attached to the home.

If you decide to sell the house you inherited, you may qualify for a tax benefit known as a stepped-up basis. This generally means the home’s tax basis is based on its fair market value when the previous owner died, rather than what they originally paid for it.

Your capital gains tax liability will depend on the difference between your net proceeds from the sale and your adjusted tax basis. If you sell the home soon after inheriting it, you may owe little or no capital gains tax if the property’s value hasn’t increased significantly since the previous owner’s death.

»Learn more: Want to know exactly how much you’ll walk away with from your home sale? Use our Hawaii Closing Cost Calculator to get a personalized estimate of your selling expenses and see your potential proceeds after closing.

Other selling expenses you might encounter in Hawaii

Title fees: Title fees typically include a title search and title insurance. Title insurance helps protect homebuyers and lenders from title-related problems, such as forged documents, previously unknown wills, or restrictions on the property that turn up during a title search. 

In Hawaii, the seller typically pays 60% of the owner’s title insurance premium, while the buyer covers the other 40%. If the buyer takes out a mortgage, they usually pay for the lender’s title insurance, too. Title search and examination fees are generally included in the title insurance premium.

Settlement fees: These fees cover the work needed to finalize your home sale, including preparing the closing paperwork and distributing payments. They’re often estimated at around 1% of the sale price, though the actual cost varies. You’ll typically pay these fees to the title company, escrow company, or attorney handling the closing. These costs may be split between you and the buyer, depending on your agreement and local practices.

Agent commissions: Real estate agent commissions traditionally added up to around 5% to 6% of a home’s sale price, split between the seller’s and buyer’s agents. However, following the National Association of Realtors settlement, buyers now negotiate their agent’s pay directly with them. 

As a seller, you’ll pay your listing agent the rate you agreed on, which is often around 2.5% to 3% of the sale price. You can also offer to cover some or all of the buyer’s agent’s compensation, but that’s optional and open to negotiation.

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How to prepare for Hawaii real estate taxes

Real estate taxes don’t need to be intimidating, and they don’t need to catch you off guard. There are a number of ways you can get an idea of what you’ll owe before the time comes to sell your home, and HomeLight is here to help. Here are some final steps to consider:

• Know your home’s value: Use an online automated valuation model (AVM) tool like HomeLight’s free Home Value Estimator. Having a ballpark idea of what your home might be worth can help you calculate the potential capital gains from the home sale.
• Save the right documents: Know what tax documents you will need if you purchase or sell a home before doing so. Consult with your tax professional about the federal and state documents needed in Hawaii and the tax breaks you might qualify for.
• Find a top agent: An experienced real estate agent can guide you through the home sale process and help you understand your tax burden and maximize your profits. Our data shows that the top 5% of real estate agents across the U.S. sell homes for 10% more than the average real estate agent.

HomeLight makes it easy to find top real estate agents in your market. From our Agent Match to innovative programs like Simple Sale and Buy Before You Sell, we have you covered when it comes to selling your home, ensuring every transaction is simple, certain, and satisfying.

Editor’s note: This post is for educational purposes only and shouldn’t be construed as financial or tax advice. If you need assistance navigating taxes, reach out to an advisor.

Writer Joseph Gordon contributed to the original version of this post.

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