Connecticut Conveyance Tax Exemptions: Family, Business, and Filing

Connecticut’s real estate conveyance tax does not apply to every deed. State law carves out a long list of Connecticut conveyance tax exemptions covering transfers between spouses, deeds ordered in a divorce, bona fide gifts, foreclosure-related conveyances, intra-family corporate restructurings, transfers to and from government agencies, deeds between certain tax-exempt organizations, and about a dozen other specific situations. You still have to file a return and claim the right exemption code, but the tax itself is zero.

Family and Life-Event Exemptions

The exemptions people use most often involve family transfers and major life changes.

Transfers Between Spouses

Any deed between spouses is exempt. The statute does not require a divorce, a death, or any particular reason for the transfer. If both parties are legally married to each other when the deed is recorded, the exemption applies.¹

Divorce Decrees

Property transfers ordered by the Superior Court under a divorce decree are separately exempt. The common scenario is one spouse keeping the marital home while the other signs over their interest as part of the settlement. The exemption flows from the court order, so it applies regardless of the property’s value.¹

Gifts, Including Parent to Child

Connecticut does not have a stand-alone parent-to-child exemption, but it does not need one. State regulations provide that a bona fide gift of real estate is not subject to the tax, even when the deed recites nominal consideration such as “love and affection and one dollar.” Because actual consideration is below $2,000, the transfer falls outside the tax entirely.² The same reasoning works for gifts between any individuals, not just parents and children. If the family member pays fair market value, the transfer is a sale and the full tax applies.

Foreclosure and Deeds in Lieu

Deeds in lieu of foreclosure that transfer a homeowner’s principal residence are exempt, as are transfers made under a foreclosure judgment.¹

Inheritance and Trust Distributions

Property that passes through a will or intestate succession generally does not trigger the conveyance tax, because the heir receives the property by operation of law rather than by purchase. The same reasoning covers trust distributions to beneficiaries, as long as the beneficiary is not paying for the interest.

The complication is buyouts among co-heirs. If three siblings inherit a house and one pays the other two for their shares, the inherited portion is still untaxed, but the purchased shares involve real consideration and can be taxable once the payment reaches $2,000. Clean probate records and clear documentation of who paid what will head off disputes with the Department of Revenue Services later.

Business and Organizational Exemptions

Many corporate transactions move real estate between related entities without any genuine sale. Connecticut recognizes several categories.

Mergers and Changes in Form

Deeds made as part of a corporate merger are exempt. A subsidiary transferring property to its parent is exempt when the only consideration is cancellation of the subsidiary’s stock. A broader exemption covers any transfer that amounts to a mere change in the form of ownership with no change in who actually benefits from the property, which is the provision most often used in reorganizations and entity conversions.¹

The “mere change of identity or form” exemption is narrow in practice. If beneficial ownership shifts at all, say by adding new investors to the restructured entity, the Department of Revenue Services may challenge the claim. Document that ownership percentages remain identical on both sides of the transfer.

Tax-Exempt Organizations

Transfers between affiliated corporations that are both exempt under Section 501(c)(2), (3), or (25) of the Internal Revenue Code qualify. Transfers from one 501(c)(3) organization to another also qualify. Deeds to nonprofit organizations that hold undeveloped land in trust for conservation or recreation are excluded from the tax.¹

Government Transfers

Any deed where the state, a municipality, or a government agency is a party is exempt. This covers acquisitions for public use, condemnations, and dispositions of surplus government property.¹

Other Exemptions People Overlook

Several additional transfer types fall outside the tax:

Deeds securing or releasing debt. Recording a mortgage or releasing a lien is not a taxable conveyance.
Deeds of partition. When co-owners divide a property into separate parcels, no tax is owed.
Tax deeds. Properties sold by municipalities for unpaid taxes are exempt.
Employee relocation transfers. When an employer buys an employee’s home under a relocation plan and resells it within six months, the resale is exempt.
Transfers under $2,000. Any deed where total consideration is below $2,000 falls outside the tax entirely.

Each of these has its own exemption code that must appear on the return.¹

Controlling Interest Transfers Are Not Covered

Connecticut imposes a separate tax when someone sells or transfers a controlling interest in an entity that owns Connecticut real estate. The rate is 1.11% of the actual value of the real property interest, and it applies when that value is $2,000 or more. The exemptions under Section 12-498 do not automatically carry over to controlling interest transfers, which are governed by a different statute.³ If your transaction involves selling the company rather than the real estate itself, do not assume the family or restructuring exemptions apply.

How to Claim an Exemption

Claiming an exemption requires filing Form OP-236, the Connecticut Real Estate Conveyance Tax Return, with the local town clerk when the deed is recorded. Even fully exempt transactions must file this form. Both pages are submitted, along with supporting documentation. The clerk retains one copy and forwards the other to the Department of Revenue Services. Electronic filing is available through the state’s myCTREC system.⁴

The return must include the correct three-digit exemption code. If you claim an exemption but leave the code blank, the town clerk cannot accept the filing. Each grantor and grantee must also provide a Social Security Number or Federal Employer Identification Number.

Supporting documents depend on the exemption. Spousal transfers may need a marriage certificate. Divorce transfers need a copy of the court decree. Corporate restructurings typically require resolutions, merger agreements, or organizational documents showing that beneficial ownership did not change. Trust distributions need the relevant trust or probate records.

Recording Fees Still Apply

Even on a fully exempt transfer, you still owe recording fees to the town clerk. As of July 1, 2025, the fee is $70 for the first page of the deed and $5 for each additional page. A separate $2 fee applies to conveyances where consideration is $2,000 or more, funding the state’s historic document preservation program. These fees are modest, but they catch people off guard who expect an exempt transaction to cost nothing at the clerk’s window.

If DRS Denies Your Exemption

Mistakes carry real cost. If the DRS determines you underpaid because of negligence or careless disregard of the rules, the penalty is 10% of the deficiency or $50, whichever is greater. Unpaid tax accrues interest at 1% per month from the original due date. If any part of the deficiency is due to fraud or intent to evade, the penalty jumps to 25%. You cannot be hit with both penalties for the same period, and serious cases can be referred for criminal prosecution.⁵

If DRS issues a deficiency assessment that rejects your exemption claim, you can request a hearing in writing within 60 days of the notice. If the hearing does not resolve things, you can file a formal protest with the DRS Appellate Division, where an appellate officer reviews the evidence and issues a final determination. From there, you have one month to appeal to the Superior Court in the New Britain Judicial District, with further appeal available to the Connecticut Supreme Court.⁵

1
Justia. Connecticut Code 12-498 – Exempt Transactions
2
Connecticut eRegulations. Connecticut Agencies Regulations 12-494-2 – Illustrations
3
Justia. Connecticut Code 12-638b – Tax on Transfer of Controlling Interest
4
Connecticut State Department of Revenue Services. Instructions for Form OP-236 Connecticut Real Estate Conveyance Tax Return
5
Connecticut General Assembly. Connecticut Code Chapter 223 – Real Estate Conveyance Tax