Updated October 7, 2026. Quick answer: Generally no, if you qualify for the exclusion. Hawaii’s Form N-103 instructions give the “maximum exclusion of gain ($250,000 or $500,000 if married filing jointly)” for a main home, and the N-11 instructions say “Hawaii conforms to certain provisions of the Internal Revenue Code”. Gain above it is taxed under the graduated table, which an alternative capital gains computation at 7.25% may reduce.
Hawaii tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Follows the exclusion: Form N-103 instructions print the same maximum exclusion of gain as federal law |
| Rate on gain above the exclusion | Graduated tax table; a Tax on Capital Gains Worksheet at 7.25% of net long-term capital gain may reduce the tax |
| Collected at the sale | Nonresident sellers only (HARPTA): 7.25 per cent of the amount realized withheld; waived on an affidavit of principal residence when the amount realized is $300,000 or less. The deed also carries a conveyance tax that starts at ten cents per $100 of value |
| Source | Hawaii Department of Taxation; Hawaii State Legislature |
What the Hawaii documents say
The Form N-103 instructions, titled Sale of Your Home, say that to qualify for the “maximum exclusion of gain ($250,000 or $500,000 if married filing jointly)” you must meet the eligibility test. The N-11 instructions add that “Hawaii conforms to certain provisions of the Internal Revenue Code”.
On the rate, the N-11 instructions have a section headed “Alternative Tax on Capital Gains”, which says a filer with a net capital gain may be able to “reduce your tax using the Tax on Capital Gains” Worksheet when taxable income is over $48,000 ($24,000 for single filers). The worksheet line reads “Multiply line 14 by 7.25% (.0725)”.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in Hawaii sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so it is not in federal adjusted gross income and, on the documents read, $0 is taxed by Hawaii. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000, which is taxed under the graduated table; the Tax on Capital Gains Worksheet at 7.25% may lower the result, so this page computes no tax.
What is collected at the sale
HRS section 235-68, known as HARPTA, requires a buyer of Hawaii real property from a nonresident to “deduct and withhold a tax equal to 7.25 per cent” of the amount realized. The statute does not apply when an individual transferor furnishes an affidavit of principal residence and “the amount realized for the property does not exceed $300,000”. The documents read show no withholding rule for a resident seller.
Hawaii also charges a conveyance tax on the deed. HRS section 247-2 lists “Ten cents per $100 for properties with a value of less than $600,000”, “Twenty cents per $100” for a value of at least $600,000 but less than $1,000,000, and higher rates above that, up to “One dollar per $100” for a value of $10,000,000 or greater. The section also has a separate paragraph (2) schedule that this page does not apply, and the payer and exemptions were not read.
What changes in 2026
The documents read for Hawaii announce no change for 2026 that is specific to the tax on a home sale. The forms and instructions read are for tax year 2025 or the newest page archived; check the state agency for 2026 forms when they are published.
What the documents do not say
- Whether the Tax on Capital Gains Worksheet lowers the tax depends on the rest of the return, and the instructions note that some filers have Hawaii gain adjustments. The conveyance tax schedule is read from HRS section 247-2 only. The instructions are for tax year 2025 and the statute is read as currently posted.
Common mistakes
- Treating HARPTA withholding as a tax owed by a Hawaii resident; the statute read applies to nonresident transferors.
- Assuming the 7.25% alternative computation always applies; the instructions say you may be able to use the worksheet, and only above a taxable income threshold.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how Hawaii taxes capital gains, Hawaii retirement taxes, and home sale exclusion calculator.
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Answer againSources
- Form N-103 Instructions, Sale of Your Home (2025): https://files.hawaii.gov/tax/forms/current/n103ins.pdf
- 2025 Form N-11 Instructions: https://files.hawaii.gov/tax/forms/current/n11ins.pdf
- HRS Section 235-68 Withholding of tax on the disposition of real property by nonresident persons: https://data.capitol.hawaii.gov/hrscurrent/Vol04_Ch0201-0257/HRS0235/HRS_0235-0068.htm
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
- HRS Section 247-2 Basis and rate of tax (Hawaii State Legislature; read October 8, 2026): https://data.capitol.hawaii.gov/hrscurrent/Vol04_Ch0201-0257/HRS0247/HRS_0247-0002.htm
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.