Hawaii taxes capital gains at 7.25%. Combined with federal taxes, your effective rate on a home sale could reach 26.1%.
HI State Rate
7.25%
Special capital gains rate
Federal Rate
15%
Most common long-term bracket
Combined Effective
26.1%
On $150K taxable gain (example)
After the $250K/$500K exclusion, here's what a typical seller might owe.
If Hawaii is where your primary residence is located and you've lived there at least 2 of the last 5 years, you can exclude up to $250K (single) or $500K (married filing jointly) of your capital gain from both federal and state taxes.
Investment and rental properties in Hawaii don't qualify for the exclusion. You'll owe 7.25% state tax plus federal tax on the full gain, plus 25% depreciation recapture on any depreciation claimed.
In Hawaii, homes sold in January sell for 11% more than those sold in August (-7%). Timing your sale right can offset a significant portion of your tax bill.
Hawaii imposes a 7.25% special capital gains tax rate, separate from its ordinary income tax brackets that top out at 11%. This preferential rate for capital gains is notable because it provides a meaningful discount compared to the standard income tax rate. However, 7.25% is still among the higher capital gains rates nationally.
With median home prices exceeding $800,000, many Hawaii sellers face substantial gains even after the federal exclusion. A seller who purchased a Honolulu home for $400,000 a decade ago and sells for $900,000 would have a $500,000 gain before exclusion. After the $250K exclusion (single), the remaining $250,000 would generate $18,125 in Hawaii state tax.
Hawaii also has a General Excise Tax (GET) that applies to real estate commissions and service fees, effectively increasing the cost of selling. While the GET is technically paid by the service provider, it is commonly passed through to the seller, adding 4-4.5% to commission and closing costs.
For non-residents selling Hawaii property, the state imposes a HARPTA withholding (Hawaii Real Property Tax Act) of 7.25% of the sale price. This is withheld at closing and applied against your actual tax liability, with any overpayment refunded when you file your Hawaii tax return.
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