Currently, the State of Connecticut imposes a conveyance tax on residential real estate sales. The current tax rate is: (1) 0.75% on the first $800,000 of the sales price plus (2) 1.25% on the portion of the sales price greater than $800,000. For example, if the sales price of a home is $900,000, the conveyance tax owed is $7,250.

On June 26, 2019, Governor Ned Lamont approved the budget passed by the Connecticut State Legislature. This new budget increased the conveyance tax on residential real estate sales where the sales price is more than $2.5 million. The new tax rate, which takes effect on July 1, 2020, is as follows: (1) 0.75% on the first $800,000 of the sales price plus (2) 1.25% on the portion of the sales price between $800,000 and $2.5 million plus (3) 2.25% on the portion of the sales price greater than $2.5 million.

This new tax rate is being called a “mansion tax” as it only increases the conveyance tax where sales price of the home is more than $2.5 million. For example, if the sales price of a home is $3.0 million, the conveyance tax owed is $33,500. But on July 1, 2020, the conveyance tax owed would be $38,500.

Starting January 1, 2021, the new law allows the taxpayer to recoup the entire amount of the conveyance tax paid at the 2.25% rate if they remain a resident of the State of Connecticut for at least six (6) years after the sale of their home. The taxpayer can claim a credit of 1/3 of the amount of the “mansion tax” paid in each of the third, fourth and fifth taxable years after the “mansion tax” was paid. If the taxpayer is unable to use all their credit for that year, they may carryforward any unused portion for up to six (6) years.

For further information, please contact Tyler Calvi-Rogers, Patrick Hanna, Jeffrey Houle, Michael Sweeney or Nishani Naidoo at 203.425.4200.

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