By Benjamin Finnerty (S), REALTOR® (RS-83812) with Keller Williams Realty Maui · Kīhei, Maui · 808-481-9748

Quick Answer: If you’re inheriting a Maui home in 2026, Hawaiʻi’s estate tax applies only to estates above $5,490,000, while the federal exclusion is $15,000,000 for deaths in 2026. Most heirs also receive a stepped-up tax basis equal to the home’s fair market value on the date of death, which can sharply reduce capital gains tax if the property is sold (figures as of October 2026).

I’m Benjamin Finnerty, a REALTOR® in Kīhei with Keller Williams Realty Maui, and here’s what inheriting a Maui home means in practical terms: which taxes can apply, how the stepped-up basis works, and what to sort out before deciding whether to keep, rent or sell. The decisions in the first few months often matter as much as the sale price.

This is general information, not tax or legal advice. Confirm your situation with a CPA or Hawaiʻi attorney.

Does Hawaiʻi have an estate tax on an inherited Maui home?

Yes, but only for larger estates. Hawaiʻi’s estate tax applies when a taxable estate exceeds the state’s $5,490,000 exclusion, according to the Hawaiʻi Department of Taxation’s Form M-6 instructions. The Tax Foundation’s 2026 state table, published October 12, 2026, lists the same $5,490,000 exemption with rates from 10% to 20%.

Here is the rate schedule from the state’s Form M-6 instructions (as of October 2026):

Taxable estate	Hawaiʻi estate tax
Up to $1,000,000	10%
$1,000,000 to $2,000,000	$100,000 plus 11% over $1,000,000
$2,000,000 to $3,000,000	$210,000 plus 12% over $2,000,000
$3,000,000 to $4,000,000	$330,000 plus 13% over $3,000,000
$4,000,000 to $5,000,000	$460,000 plus 14% over $4,000,000
$5,000,000 to $10,000,000	$600,000 plus 15.7% over $5,000,000
Over $10,000,000	$1,385,000 plus 20% over $10,000,000

Two points surprise people. First, the return (Form M-6) is due nine months after the date of death and is filed by the personal representative. Second, Hawaiʻi’s estate tax can reach Hawaiʻi real property owned by someone who lived elsewhere, so a mainland owner of a Maui condo shouldn’t assume only their home state’s rules matter.

A 2026 bill, HB2148, proposed lowering the exclusion to $3 million for some estates. As of October 2026, the state instructions and the Tax Foundation’s table both still show $5,490,000.

How does the federal estate tax compare in 2026?

The federal threshold is much higher. The IRS lists a basic exclusion amount of $15,000,000 for people who die in calendar year 2026, and an annual gift exclusion of $19,000 per recipient. So an estate can owe Hawaiʻi estate tax without owing any federal estate tax.

What is a stepped-up basis on an inherited Maui home?

For most heirs, the tax basis of an inherited home is its fair market value on the date of death, not what the original owner paid. The IRS says the basis is the property’s fair market value on the date of death, or on the alternate valuation date if the executor files Form 706 and elects it.

Here’s a simple illustration (hypothetical numbers). Say a home was bought decades ago for $250,000 and was worth $1,150,000 on the date of death, close to the REALTORS® Association of Maui’s September 2026 single-family median of $1,150,000 (reported by Maui Now on October 9, 2026). If the heir sells a few months later for $1,180,000, the taxable gain is figured from the $1,150,000 basis, not from $250,000, before selling costs.

That’s why documenting the date-of-death value matters; ask your CPA whether an appraisal makes sense.

How does a Maui home pass to heirs: will, trust or transfer on death deed?

It depends on how the property was titled. A home held in a trust passes under the trust’s terms. Hawaiʻi also allows a transfer on death deed under HRS chapter 527, but the deed must state that the transfer happens at the owner’s death and must be recorded with the Bureau of Conveyances or filed with the Land Court before the owner dies. Property that passes only by will usually goes through probate before the heirs can sell it with clear title.

Should heirs keep, rent or sell an inherited Maui home?

There’s no single right answer, but a few Maui-specific items change the math:

• Property tax class and exemptions. If an heir will live in the home, the home exemption has to be claimed in the new owner’s name. See why Maui’s December 31 exemption deadline matters.
• Condo zoning. If the property is an apartment-zoned condo used as a vacation rental, Bill 9 (Ordinance 5909, signed December 15, 2025) is phasing those rentals out, which affects rental income and resale.
• Fee simple or leasehold. Check the title. A leasehold condo has a lease end date that directly affects value. My guide to leasehold vs. fee simple on Maui explains what to look for.
• Insurance and vacancy. Tell the insurance company if the home will sit empty, and check the policy for vacancy conditions.

What if the heir lives on the mainland and sells?

Hawaiʻi withholding can apply. When a nonresident sells Hawaiʻi real property, HARPTA withholding may apply at closing, and FIRPTA can apply to foreign sellers. My post on selling a Maui home: conveyance tax, HARPTA and FIRPTA walks through how that works, and my guide to capital gains tax on a Maui home sale covers the rest of the tax picture.

My Take: What I’m Telling Heirs Deciding What to Do Next

When someone inherits a Maui property and asks me about taxes before talking about price, my answer is the same one I give long-time owners. First of all, you need to talk with your accountant, and you need to work out whether HARPTA or FIRPTA applies to you. Let me know whether a 1031 exchange is something you’re considering. But the most important thing is that you plan this well with your tax advisor, so you’re in the best position tax-wise.

From the real estate side, I’d sequence it like this: confirm who has legal authority to sell, gather the deed and any trust or probate documents, get a clear read on the value as of the date of death, and only then decide whether to keep, rent or sell.

If you do sell, price from what is actually selling now. Maui’s single-family median was $1,150,000 in September 2026, down 11% from a year earlier, per RAM, so values from a year or two ago may not hold.

Frequently Asked Questions

Do I pay Hawaiʻi inheritance tax on a Maui home?

Hawaiʻi has an estate tax, not an inheritance tax. The estate, not the heir, owes it, and only when the taxable estate exceeds $5,490,000 (as of October 2026).

What is the 2026 federal estate tax exemption?

$15,000,000 per person for deaths in 2026, according to the IRS.

Do I owe capital gains tax if I sell an inherited Maui home right away?

Usually the gain is measured from the home’s value on the date of death, so a quick sale near that value may produce little taxable gain. Your CPA will confirm.

Ask Benjamin

If you’ve inherited a Maui home or condo and want a clear picture of its current value and your options, I’m happy to help. I’m Benjamin Finnerty, REALTOR® with Keller Williams Realty Maui in Kīhei. Call or text me at 808-481-9748 or email benjamin@the808team.com.

Sources: Hawaiʻi Department of Taxation Form M-6 instructions (rev. 2025); Tax Foundation, Estate and Inheritance Taxes by State, 2026 (Oct. 12, 2026); IRS, What’s New — Estate and Gift Tax, and Gifts & Inheritances guidance; HRS §527-9; Grassroot Institute of Hawaiʻi testimony on HB2148 (March 2026); REALTORS® Association of Maui via Maui Now (Oct. 9, 2026).