Honolulu City Council voted to change the minimum stay requirement for short term rentals from 30 days to 90 days. There will be some exemptions in certain apartment and resort zones. The new bill comes shortly after the Safe Travel program has ended in Hawaii. For more information, you can read the article from Travel and Leisure here.
UHERO, the Economic Research Organization at the University of Hawaii, has confirmed that regulation is one of the primary reasons for the high cost of housing in our state. Released this week, “Measuring the Burden of Housing Regulation in Hawaii” should you wish to read it.
Maui Luxury Real Estate LLC ~ The Hansen Ohana. ~ February 2022
Welcome to the great start of 2022! 2021 has certainly been an interesting year with the pandemic hopefully showing in the rear view mirror this year. As we all know Covid has been a real challenge for Maui as well as all the Hawaiian Islands, the United States and the world. The good news is that our percentages of spread have dropped. People all over the world continue to look for a safe place with warm weather to enjoy. Maui is that getaway. The changing regulations Regarding traveling to Maui can be found at https://travel.hawaii.gov/#/welcome
Maui’s Economy: We have attended a number of tax and economic forecasts in January and early February. Generally speaking prices continue to increase and inventory continues to stay somewhat low. Single family home prices have increased over the last year by 18% to a median price of $1,157,500 but the number of sales decreased by almost 9%. Condominiums prices have increased 26% to a median sales price of $707,500 however the number of sales have actually increased 36%. It appears that inflation may be here to stay for a while. Interest rates are ticking up which changes the affordability rate. With inflation cutting deeply into the value of the US dollar and the Fed indicating that they will most likely raise interest rates three to four times in 2022, planning for your future should be at the top of your list. This could mean it is a great time to buy and a great time to sell. While many feel the hot market will end most economists believe that prices will continue to increase albeit at a slower pace. This means that buyers might strongly consider getting off the sidelines and buying now before prices and interest rates go up. The pandemic caused many who had been planning to move on but have held back so far. That may be starting to change.
It’s important to pay attention to what the Maui County is doing. There are some substantial problems they could bring forth to the property owners. Right now the Minatoya Act (Vacation Rental Units) is one of their targets. Unfortunately, we need to remember most of them have minimum economic education which is a problem when they come up with laws they pass. The last issue that is now a burden is the Tiered Property Tax law they passed. This hurt a lot of property owners, especially condo owners. The only way we can keep Maui property owners and business owners ready for action is to keep informed and be ready to act and we will do our best to do that for you.
Enjoy Maui Virtually!
Our Live Beach Webcam has sound so take time out of your busy life to enjoy the sounds of surf as well as wildlife by linking to https://www.mauirealestate.net/video.php?Size=Large
Wishing to virtually tour properties, open houses and 3D tours go to: http://www.MauiRealEstate.NET
For more detailed statistics go to: https://www.mauirealestate.net/real_estate_stats.html
Thank you to all of you who donated to our annual Children’s fund raiser. You have made a difference in many children’s lives who have experienced much sadness including abuse and neglect.
Bob Hansen PB R(B) 808-283-9456 RB-17532
Clint Hansen BIC R(B) 808-280-2764 RB-21616
Donna D. Hansen R(S) 808-280-1650. RS-49765
MAUI LUXURY REAL ESTATE LLC
The Hansen Ohana ~ Maui’s Real Estate Family for over 30 years
If a property has not been owned for 5 years, and you wish to operate it as a Bed & Breakfast, permit applications are due May 26, 2022. Please contact Maui BNB Permits to get started or to see if your property qualifies.
A foreign person that sells or exchanges a U.S. real property interest is subject to a required withholding under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA). A U.S. real property interest includes sales of interests in parcels of real
The required withholding is 15% of the gross sales price unless the buyer is acquiring the property as a personal residence and the sale price is between $300,001 and $1 million in which case the withholding will only be 10%. This amount must be remitted to the IRS within 20 days after the date of transfer.
Additionally, Treasury Decision 9082 (effective November 4, 2003) requires all foreign sellers of U.S. real property to have a Taxpayer Identification Number (TIN) to pay the required withholding or to request a reduced tax withholding. Individuals who do not qualify for Social Security Numbers (SSN) may – by filing form W-7 – obtain Individual Taxpayer Identification Numbers (ITINs) to meet the requirement to supply a TIN.
What is the definition of “foreign person” under FIRPTA?
FIRPTA defines a “foreign person” as a non-resident alien individual, a foreign corporation that has not made an election under section 897(i) of the Internal Revenue Code to be treated as a domestic corporation, a foreign partnership, a foreign trust, or a foreign estate. The term “foreign person” does not include a resident alien individual.
Who is required to withhold and remit the withholding to the IRS?
The buyer/transferee and certain agents of the buyer are responsible for withholding the required amount.
How and when is the withholding paid?
The tax must be reported and paid using IRS Form 8288, which must be filed with the IRS by the 20th day after the date of the transfer.
Are there any exceptions to the withholding requirement?
Yes, there are numerous exceptions to the withholding requirement.
The most common exceptions are as follows:
1. Buyer acquires the property for use as a home and the sales price is not more than $300,000;
2. Seller provides a certification stating under penalty of perjury that they are not a foreign person;
3. Seller obtains a withholding certificate from the IRS that excuses the withholding;
4. Seller provides the buyer a notice of non-recognition stating that no recognition of gain or loss on the transfer is required because of a provisions in the IRC Code or U.S. tax treaty; or
5. Amount the seller realizes from the disposition is zero.
For a comprehensive list of exceptions, click here.
How does the seller obtain a Withholding Certificate?
A transferor looking to reduce or eliminate the FIRPTA withholding amount must file a Form 8288-B, Application for Withholding Certificate for Disposition by Foreign Persons of U.S. Real Property Interests. Form 8288-B requires a TIN. Thus, a transfer-or who does not qualify for an SSN may attach Form should be aware that it takes the IRS 90 days to respond to an Application.
What is a notice of non-recognition?
A notice of non-recognition is a written notice given by the seller to the buyer stating that no recognition of any gain or loss on the transfer is required because of a non-recognition provision in the Internal Revenue Code – e.g. IRS section 1031– or a provision in a U.S. tax treaty. The buyer is required to file a copy of the notice with the IRS by the 20th day after the date of transfer. The notice must contain the seller’s TIN. There is no promulgated form for this notice.
A buyer is personally liable under FIRPTA if there is ultimately any actual tax liability to the seller resulting from the sale. The IRS can assess the full 15 percent of the sales price that should have been withheld or the seller’s actual tax liability on the sale, whichever is less, plus interest and penalties. Thus, a buyer should never close a sale in reliance on a notice of non-recognition transaction except on the advice of a CPA, attorney, or other tax advisor because personal liability can result from reliance on an improper notice of non-recognition.
What if the seller applies for a Withholding Certificate to excuse withholding and the application is still pending at the time of the disposition?
If an application for a Withholding Certificate is submitted to the IRS on or before the date of a transfer and the application is still pending on the date of transfer, the withholding tax must be withheld, but it does not have to be paid and reported until 20 days after the withholding certificate or notice of denial is mailed by the IRS. It is important to note that if the seller’s principal purpose in applying for a withholding certificate is to delay paying the withholding, the buyer/transferee will be subject to interest and penalties.
How does withholding affect a seller’s 1031 exchange?
A seller in a 1031 exchange may use proceeds only to pay necessary expenses of sale or for the purchase of replacement property. Amounts expended for other items will be taxable. Thus, it is important for foreign sellers to recognize that using proceeds to pay the FIRPTA has a taxable consequence because FIRPTA is not considered a necessary expense of sale. To avoid this result, sellers should bring in cash to the closing agent to pay for the FIRPTA withholding, thus allowing all proceeds generated by the sale to be used in the exchange.
Thank you Julie Bratton, Vice President Old Republic Exchange for sharing this valuable information with us.