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Hawaii Real Estate Sale: Capital Gains Tax Explained

A flat rate that's actually lower than several of Hawaii's own ordinary-income brackets — a genuine rarity among the states.

HRS §235-51(f)

By the FigureMyTax Editorial Team · Reviewed 2026 · How we calculate

Quick answer: a flat 7.25% for long-term gains — often lower than Hawaii's own ordinary income brackets, which run up to 11%. See the full cost picture in the Hawaii probate real estate sale calculator.

One of the few states with an actual capital gains discount

Straight from Hawaii's tax code: short-term capital gains held for less than a year are taxed as ordinary income subject to Hawaii's brackets, while long-term capital gains held for more than a year are subject to a flat 7.25% tax rate, separate from the ordinary brackets — a genuine, meaningful discount, unlike nearly every other state covered here.

An inherited house almost always qualifies

A gain on a promptly sold inherited house is typically treated as long-term, since inherited property automatically qualifies for long-term treatment regardless of how long the estate or heir actually holds it after the date of death.

A rate under legislative pressure, but still current law

The Hawaii legislature has repeatedly introduced bills to raise the rate toward 9%, arguing the current 7.25% rate primarily benefits wealthy individuals and nonresident real estate investors — but as of this review, the 7.25% rate remains current law.

A separate question from the state estate tax

Hawaii's separate state estate tax applies only above roughly $5.49 million (2026) — a distinct calculation from the income tax on the sale's gain, and one that affects far fewer estates.

Facing probate in Hawaii?

A local probate attorney can review your estate — many offer a free consultation.

Talk to a Hawaii attorney

The flat 7.25% long-term rate applies identically whether the sale closes in the First Circuit (Honolulu), Second Circuit (Maui), Third Circuit (Hawaii Island), or Fifth Circuit (Kauai).

Capital gains tax on the sale — frequently asked questions

Does Hawaii tax long-term capital gains differently from ordinary income?

Yes — long-term capital gains held for more than a year are taxed at a flat 7.25%, separate from Hawaii's ordinary income brackets, which range from 1.4% to 11%.

Is a gain on a promptly sold inherited house typically long-term or short-term?

Long-term — inherited property automatically qualifies for long-term treatment regardless of how long the estate or heir actually holds it after the date of death.

Is there a push to raise Hawaii's capital gains rate?

Yes — the Hawaii legislature has repeatedly introduced bills to raise the rate toward 9%, arguing the current 7.25% rate primarily benefits wealthy individuals and nonresident real estate investors, though as of this review the 7.25% rate remains current law.

Does Hawaii's state estate tax apply on top of this income tax?

Only for larger estates — Hawaii's separate state estate tax applies above roughly $5.49 million (2026), a distinct calculation from the income tax on the sale's gain.

Keep going

Hawaii Probate Real Estate Sale CalculatorYour estimate, based on your answers Court Approval to Sell in HawaiiWhen the will or a judge changes the default Hawaii Sale Costs & CommissionReasonable compensation, plus the state estate tax Hawaii Small Estate CheckerDoes this estate even need a sale?

This page provides general guidance only and is not legal, tax, or financial advice. Based on HRS §235-51(f), Chapter 236E, and federal Internal Revenue Code § 1014. Confirm current figures with the IRS, the Hawaii Department of Taxation, a CPA, or a licensed Hawaii attorney before acting.