Understanding Connecticut’s Transfer Tax: A Quick Guide
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
If you’re selling your home in Connecticut, understanding transfer taxes is important. Real estate transfer taxes are fees imposed by the state, county, or city when property ownership changes hands. These taxes can significantly impact your bottom line, so knowing what to expect is essential for a smooth transaction.
In Connecticut, transfer taxes are an important part of the home-selling process. Our short guide will explain how these taxes work in the state, including who pays them, the transfer taxes applicable, and other related fees.
Connect with a Top Agent to Help Maximize Value
Even rockstar agents can’t make your tax liability disappear, but HomeLight data shows that the top 5% of agents across the U.S. help clients sell their home for as much as 10% more than the average real estate agent, helping offset the tax bill.
Disclaimer: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Connecticut area tax services or attorneys should not be considered endorsements.
What are transfer taxes?
The Federal Trade Commission defines transfer taxes as state or local taxes due when the title of property passes from one owner to another. Essentially, when you transfer the title of your home—your legal right to own the property—to a new owner, the government imposes a tax on this transaction.
The amount you owe in transfer taxes depends on the location of your property, following specific state, county, or city regulations. Similar to other forms of taxation, these taxes are designed to generate revenue for government services and infrastructure.
Who pays for transfer taxes?
The party responsible for paying a real estate transfer tax varies by state. In Connecticut, the seller is responsible, and this tax must be paid before the deed on the property can be recorded. There are exemptions, however, which will be discussed later in this article.
What are the types of transfer taxes?
Transfer taxes will typically vary based on local guidelines but can generally be broken down into three categories — state, city, and county, depending on the state. Here’s a quick look at how it works in Connecticut:
State conveyance taxes
In the Constitution State, the state’s transfer tax (also referred to as a conveyance tax) varies based on the amount the property is sold for.
A tax rate of 0.75% of the first $800,000 of the property’s sales price is levied for residential dwellings. A rate of 1.25% is levied for sale prices that exceed $800,000, up to $2.5 million, with a rate of 2.25% levied at any sales price over $2.5 million.
Municipal transfer taxes
In addition to Connecticut’s State conveyance tax, certain municipalities levy their own tax rate, which can change based on the location. These tax rates can range between 0.25% and 0.50% of the property’s sales price.
An additional 0.25% tax is levied in any of the following municipalities: Bloomfield, Bridgeport, Bristol, East Hartford, Groton, Hamden, Hartford, Meriden, Middletown, New Britain, New Haven, New London, Norwalk, Norwich, Southington, Stamford, Thomaston, Waterbury, Windham.
Other transfer fees
In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.
If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.
Are transfer taxes deductible?
Transfer taxes, unfortunately, cannot be deducted from your income tax return. However, there is a way to reduce your capital gains taxes potentially. Capital gains, the profits made from selling your home, are subject to federal taxation like any other asset sale profits.
The IRS allows sellers to treat paid transfer taxes as part of their selling costs. You can subtract these costs from your home’s final sale price. By reducing your home’s sale price with these expenses, you can lower the capital gains taxes owed on any profit you earn from the sale.
Transfer tax exemptions
Some sellers in Connecticut might qualify for exemptions from transfer taxes, depending on specific circumstances. These exemptions can include:
- Transfers between spouses
- Conveyances pursuant to court decrees such as an annulment, dissolved marriage, or foreclosure by sale
- Transfers of property to nonprofit organizations for conservation purposes
- Deeds resulting from corporate mergers
- Transfers of a principal residence where the gross purchase price is less than the total amount owed on mortgages and tax liens
- Transfers of certain principal residences with deteriorating concrete foundations due to pyrrhotite
Estimating transfer taxes for your home sale
To get a quick estimation of what you’ll make from selling your Connecticut home, try HomeLight’s Net Proceeds Calculator. This tool considers your closing costs, including transfer taxes, agent fees, and any renovations, giving you a clear picture of your financial outcome.
For an accurate assessment of your transfer taxes and other closing expenses before finalizing your home sale, it’s wise to consult with a top real estate agent. These expenses, which are often considered the responsibility of either the buyer or the seller, can be negotiated based on the market situation.
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