What Is the Connecticut Real Estate Conveyance Tax?

The Connecticut real estate conveyance tax is a levy on the transfer of real property that generates revenue for the state and the municipality where the property is located. This tax is calculated based on the property’s sale price, and the seller is responsible for paying it at the time of closing.

State and Municipal Tax Rates

The conveyance tax framework is composed of two parts: a state tax and a municipal tax, both calculated from the property’s final sale price. The state imposes a tiered tax rate on residential properties. For a residential property, the first $800,000 of the sale price is taxed at 0.75%, and the portion between $800,001 and $2,500,000 is taxed at 1.25%. Any amount exceeding $2,500,000 is subject to a rate of 2.25%. Sellers who pay this higher rate may be eligible for an income tax credit if they remain residents of Connecticut.

Non-residential properties, excluding unimproved land, are subject to a flat state tax rate of 1.25%. When residential real estate is sold to a corporation or other entity, a different rate structure applies: the tax is 1.75% on the first $800,000 of the sale price and 2.25% on the portion exceeding that amount.

In addition to the state levy, municipalities also charge a conveyance tax. Most towns impose a rate of 0.25% of the sale price. However, certain designated municipalities have the authority to charge a higher rate, up to 0.50%.

To illustrate, for a residential home sold for $1,000,000 in a town with a 0.25% municipal rate, the state tax would be $8,500 (0.75% on the first $800,000 plus 1.25% on the remaining $200,000). The municipal tax would be $2,500 (0.25% of the $1,000,000 sale price). The total conveyance tax for the seller would be $11,000.

Exemptions from the Conveyance Tax

Certain real estate transfers are exempt from the conveyance tax if they meet specific statutory conditions. Common examples include transfers between spouses or property transfers that qualify as a genuine gift. Other qualifying situations include property transfers that occur as a result of a court-ordered decree in a divorce case. Transfers involving governmental bodies are also not subject to the tax, and a recent change also exempts deeds made to a public housing authority.

Information and Forms for Payment

To pay the conveyance tax, the seller must complete Form OP-236, the Real Estate Conveyance Tax Return. The necessary details include the full names and mailing addresses of the seller and buyer, the physical address and description of the property, the total sale price, and the date of the property transfer. If the transfer qualifies for one of the statutory exemptions, the filer must enter a specific exemption code on the return, which can be found in the form’s instructions.

The Payment and Filing Process

The payment and filing process is managed during the real estate closing. The closing attorney or title company handling the transaction will collect the calculated tax amount from the seller’s proceeds. The attorney then submits the completed Form OP-236 and the tax payment, along with the property deed, to the town clerk’s office in the municipality where the property is located. The town clerk will review the documents and stamp the deed and tax return, which serves as official confirmation that the tax has been paid, allowing the deed to be legally recorded.