Hawaii
A 1031 exchange in Hawaii, where the seller's certification decides whether 7.25% is withheld.
Hawaii makes the buyer withhold 7.25% from a nonresident seller unless the seller gives the buyer a signed certification that a federal nonrecognition rule applies. For an exchange, that certification, not a state approval, is the step to get right before closing.
If you do not live in Hawaii and you sell Hawaii real property, the buyer has to withhold 7.25% of the amount realized and send it to the Department of Taxation. For a 1031 exchange, the seller can avoid that withholding by signing Form N-289, certifying that a federal nonrecognition provision means no gain or loss is recognized on the transfer, and giving it to the buyer. The seller does not file it with the state, so it needs to be in the closing file before closing.
onezero3one acts as qualified intermediary for exchanges of Hawaii property, subject to a review of each file before an exchange agreement is signed. We work with your closing agent and tax advisor; we do not give tax or legal advice.
What is specific to this state
The federal rules in IRC §1031 decide whether an exchange qualifies. The items below are state requirements that sit alongside them at closing or on the return. Each links to the official source it was checked against; confirm the current version with your closing agent and tax advisor before relying on it.
| Issue | What applies | Usually handled by | Source |
|---|---|---|---|
| Tax at closing for sellers | Hawaii (HARPTA) requires the buyer to withhold 7.25% of the amount realized on a disposition of Hawaii real property by a nonresident person and to report and pay it by the 20th day after the date of transfer, on Form N-288 with an N-288A for each nonresident seller. A buyer who fails to withhold is liable for the tax. Nonresident persons selling Hawaii real property; a single-member LLC not taxed as a corporation is treated as its sole member. | Buyer withholds; closing agent usually handles filing | Hawaii Department of Taxation, Form N-288 and instructions (Rev. 2025); HRS 235-68 Checked September 30, 2026 |
| Exchange exemption from withholding | The buyer need not withhold if the seller gives the buyer Form N-289 (box 2) certifying that, by reason of a nonrecognition provision of the Internal Revenue Code, the seller is not required to recognize any gain or loss on the transfer, with a brief description of the transfer and a brief summary of the law and facts. The statute does not call for an intermediary letter. Nonresident sellers whose transfer qualifies under a federal nonrecognition provision such as IRC 1031; the buyer may not rely on a certification it knows is false. | Seller signs and gives to the buyer; closing agent keeps it in the file | Hawaii Department of Taxation, Form N-289 and instructions (Rev. 2025); HRS 235-68(d) Checked September 30, 2026 |
| Who keeps the certification | The seller gives Form N-289 to the buyer and does not file it with the Department for approval. The buyer keeps it and does not forward it if every seller has certified; if only some sellers certify, the buyer files N-288 and N-288A with a copy of each N-289 attached. The seller must still file a Hawaii income tax return reporting the sale. Buyers and sellers in a Hawaii sale where a certification is given. | Seller, with the closing agent filing at recording | Hawaii Department of Taxation, Instructions for Form N-289 (Rev. 2025) Checked September 30, 2026 |
| Withholding certificate alternative | A seller can apply on Form N-288B for a withholding certificate. The Department issues one if it is satisfied that no gain will be realized or that proceeds will be insufficient to pay the withholding, stating the amount to be withheld, if any. Submitting the application does not by itself relieve the buyer of its obligation to withhold and file. Nonresident sellers who cannot or prefer not to certify, for example where boot may create some gain. | Seller applies to the Department; buyer attaches the approved N-288B to Form N-288 | Hawaii Revised Statutes 235-68(e) Checked September 30, 2026 |
| Conveyance tax on the deed | Hawaii's conveyance tax applies to transfers of realty by deed and similar documents, based on actual and full consideration including liens, at $0.10 per $100 under $600,000 up to $1.00 per $100 at $10 million or more (higher tiers for a condominium or single-family home where the buyer is not eligible for a county homeowner's exemption). The statute makes the person conveying the property liable, due no later than 90 days after the transaction. Every Hawaii deed, including both deeds in an exchange. | Grantor pays by statute; closing agent collects at recording | Hawaii Revised Statutes 247-1, 247-2, 247-4 Checked September 30, 2026 |
| Conveyance tax and exchanges | Section 247-1 taxes all transfers or conveyances of realty by deed and any other document. The 17 exemptions in section 247-3 (security instruments, confirmatory deeds, spousal or parent-child nominal-consideration documents, easements, partition, revocable living trust transfers, mergers and similar) do not mention like-kind exchanges or exchange intermediaries. Sale and purchase deeds in a Hawaii exchange. | Closing agent, under the contract's allocation | Hawaii Revised Statutes 247-1 and 247-3 Checked September 30, 2026 |
| State income tax treatment | For tax years beginning after December 31, 2024, Hawaii defines the Internal Revenue Code as of December 31, 2024 as applied to the determination of gross income, adjusted gross income and taxable income, subject to stated exceptions, and the Department's own forms treat federal nonrecognition provisions as operative under the Hawaii chapter. No separate Hawaii clawback or annual reporting rule for replacement property was identified. Hawaii income tax on sellers of Hawaii real property. | Your tax advisor | Hawaii Revised Statutes 235-2.3(a) Checked September 30, 2026 |
Withholding on nonresident sellers
Hawaii's withholding rule, known as HARPTA, applies when a nonresident person disposes of Hawaii real property. The buyer deducts 7.25% of the amount realized, which for this purpose is generally the sale or contract price. The buyer reports and pays it on Form N-288, with a Form N-288A for each nonresident seller, by the 20th day after the date of transfer. A buyer who fails to withhold is liable for the tax.
"Resident person" is defined by statute and includes entities formed or registered under Hawaii law. A single-member LLC that has not elected corporate tax treatment is disregarded, and the withholding rule is applied as if its sole member were the seller.
How an exchange avoids the withholding
The buyer does not have to withhold if the seller gives the buyer an affidavit or certification stating the seller's taxpayer identification number and that, by reason of a nonrecognition provision of the Internal Revenue Code, the seller is not required to recognize any gain or loss on the transfer. The Department's form for this is N-289, and box 2 is the one that covers a nonrecognition provision such as §1031. The form asks for two things in writing:
- a brief description of the transfer; and
- a brief summary of the law and facts supporting the claim that recognition of gain or loss is not required.
The seller signs Form N-289 and gives it to the buyer. The Department's instructions say the seller should not file it with the Department for approval, and that the buyer keeps it rather than forwarding it, as long as every seller has certified. If some but not all sellers certify, the buyer still files Forms N-288 and N-288A and attaches a copy of each N-289 received. A buyer who knows the certification is false cannot rely on it.
The statute and the form do not call for a letter from the intermediary. Ask your closing agent what supporting documents they want in the file.
The certification rests on recognizing no gain or loss. If you expect to take cash or other boot out of the exchange, some gain may be recognized, so ask your tax advisor whether the certification fits or whether to apply for a withholding certificate instead.
The withholding certificate route
A seller can instead apply to the Department on Form N-288B for a withholding certificate. The Department issues one if it is satisfied that no gain will be realized, or that the proceeds will be too small to cover the withholding after costs and any mortgage or lien. The certificate states the amount to be withheld, if any. Filing the application does not by itself relieve the buyer of the duty to withhold and file, so this route needs to be approved before closing to be of use.
Conveyance tax on each deed
Hawaii's conveyance tax applies to all transfers of realty by deed and similar documents, on the actual and full consideration including any liens or encumbrances. The statute makes the person conveying the property liable for it, and it is due no later than 90 days after the transaction and before the document is sealed for recording. The exemption list in section 247-3 covers items such as security instruments, nominal-consideration transfers between spouses or parent and child, easements, and transfers to a revocable living trust. It does not mention exchanges or exchange intermediaries, so assume the tax applies to your sale deed and to the deed on your purchase.
| Property value | Standard rate | Condominium or single-family home, buyer not eligible for a county homeowner's exemption |
|---|---|---|
| Under $600,000 | $0.10 | $0.15 |
| $600,000 to under $1 million | $0.20 | $0.25 |
| $1 million to under $2 million | $0.30 | $0.40 |
| $2 million to under $4 million | $0.50 | $0.60 |
| $4 million to under $6 million | $0.70 | $0.85 |
| $6 million to under $10 million | $0.90 | $1.10 |
| $10 million or more | $1.00 | $1.25 |
State income tax
For tax years beginning after December 31, 2024, Hawaii defines the Internal Revenue Code, as amended through December 31, 2024, as the federal code that applies to the determination of gross income, subject to the exceptions in the chapter. The Department's own N-289 refers to federal nonrecognition provisions as operative under the Hawaii income tax chapter. Even where no tax is withheld, the Department's instructions note that the seller must still file a Hawaii income tax return to report the sale. We did not identify a separate Hawaii annual reporting rule for replacement property; confirm with your tax advisor.
Sequence for a nonresident's Hawaii sale
- Before closing: sign the exchange agreement; the seller completes Form N-289 with the description and legal summary, or applies for a withholding certificate.
- At closing: the seller hands the N-289 to the buyer; the contract is assigned and the buyer notified; proceeds go to the intermediary. Conveyance tax is paid by the grantor on each deed.
- Day 45 and day 180: identification and purchase, as in any exchange. The deadline calculator gives both dates.
- After the year ends: the seller files a Hawaii income tax return reporting the transfer.
Questions Hawaii sellers ask
I live in California and am selling a Hawaii rental. Will Hawaii withhold if I am doing a 1031?
Not if you give the buyer a completed Form N-289 certifying that a nonrecognition provision applies. Without it, the buyer must withhold 7.25% of the amount realized.
Do I send Form N-289 to the Department of Taxation?
No. The seller gives it to the buyer, and the buyer keeps it unless some sellers did not certify.
What if I will receive some cash at closing?
Cash or other boot can mean recognized gain. Talk to your tax advisor about whether to certify, or to apply for a withholding certificate on Form N-288B.
Is the conveyance tax waived for an exchange?
The exemption list does not include exchanges, so the tax applies to each deed. By statute the person conveying the property pays it.
Related
Sources
- HRS 235-68 Withholding of tax on the disposition of real property by nonresident persons (checked September 30, 2026)
- Hawaii Department of Taxation, HARPTA forms page (N-288, N-288A, N-288B, N-288C, N-289; Rev. 2025) (checked September 30, 2026)
- Form N-288 instructions (Rev. 2025) (checked September 30, 2026)
- Form N-289 and instructions (Rev. 2025) (checked September 30, 2026)
- HRS 247-1, 247-2, 247-3, 247-4 (conveyance tax) (checked September 30, 2026)
- HRS 235-2.3 Conformance to the federal Internal Revenue Code (checked September 30, 2026)
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