The Conveyance Tax increase, aka The Legacy Lands Act (HB1308) was signed into law by Gov. Linda Lingle in June and became effective July 1, 2005.
Under the new law a seller or transferor of real property is assessed $0.10 per $100 on sales up to $600,000, $0.20 per $100 on sales of $600,000 to $1,000,000 and $0.30 per $100 on sales above $1,000,000.
The median price in May for a home on Oahu in was $610,000, Maui $780,000 and Kauai $665,000. Median means that half the homes sold were above that price and half were below. Only on the Big Island was the median price below the tax increase threshold. Many sellers in Hawaii will now be paying more in conveyance taxes. But there’s more.
If the purchaser is ineligible for a county real property tax homeowner’s exemption, an additional $0.05 per $100 is added for sales of single family homes and condos. Eligibility is declared by both the buyer/purchaser and the seller/transferee on state tax form P-64A and must be signed by both parties under penalties prescribed in section 231-36, Hawaii Revised Statutes (HRS). Real estate agents must have a power of attorney to sign the form as agent.
Questions: If the buyer fails to qualify for the exemption, how will the tax department know? If they find out, will there be a supplemental assessment? Who will be responsible? Since both buyer and seller must sign the declaration, can they both be held liable for any supplemental tax? Since the seller customarily pays the conveyance tax, can they ask a higher price if the buyer is ineligible for an exemption? Can sellers discriminate against buyers based on eligibility for a tax exemption and will we have to make investors a protected class?
Walt Harvey, (R), ABR, CRS, GRI, SRES, ePRO, is a real estate broker with East Oahu Realty and is Quality Service Certified®. Walt partners with his wife Arla and together they specialize in residential, commercial and investment real estate. You can reach them on their Web site: http://www.coastalhawaii.com Have a real estate question? Email them: mailto:walt@coastalhawaii.com or call 375-8959.
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