Connecticut Transfer Tax: Rates, Municipal Add-On, and Exemptions

The Connecticut transfer tax, formally called the real estate conveyance tax, applies to every property sale in the state where the price is $2,000 or more. The seller pays it, the combined state and municipal rates start at 1.00%, and on high-value homes the top slice can be taxed at 2.50% or more once local add-ons are counted.¹

Who Pays

The statute places the tax on the person conveying the property, which means the seller.² At closing, the attorney or title company runs the numbers, pulls the tax from the seller’s proceeds, and submits the return and payment to the town clerk.

Contracts can shift the economic burden. In new-construction and bank-owned sales, builders and lenders often require the buyer to pay the conveyance tax as a term of the deal, so read the purchase agreement before you assume anything. Sellers should know the flip side: your statutory obligation doesn’t go away because a buyer agreed to cover the cost. If the buyer doesn’t pay, the state still looks to you.

Rates by Property Type

The state portion of the tax varies with what kind of property is changing hands.¹

Residential Property

Residential sales are taxed on a marginal scale, so higher rates apply only to the dollars above each threshold:

First $800,000: 0.75%
$800,001 to $2,500,000: 1.25%
Above $2,500,000: 2.25%

A $3 million home only pays the 2.25% rate on the last $500,000; the earlier dollars stay at their lower tier rates.

Commercial Property

Non-residential property is taxed at a flat 1.25% state rate on the full price. Office buildings, retail spaces, industrial facilities, and mixed-use properties that aren’t primarily residential fall into this category.

Unimproved Land

Vacant lots, farmland, forest land, and open space are taxed at the base 0.75% state rate rather than the 1.25% commercial rate.

The Municipal Add-On

Every taxable sale carries a mandatory 0.25% municipal portion on top of the state rate. It is built into the same statute and flows to the town where the property is recorded.¹

Nineteen designated municipalities can charge an additional local tax of up to 0.25% beyond the base. The eligible list includes Bridgeport, Hartford, New Haven, Stamford, Waterbury, Norwalk, and thirteen others. Most of the nineteen impose the full additional 0.25%. Groton and Thomaston have declined to, and Stamford uses a tiered rate that varies with the sale price.³

Put together, a residential sale under $800,000 costs 1.00% in most of the state and 1.25% in an eligible town that charges the full add-on. Commercial minimums run 1.50%, rising to 1.75% in those same towns.

Worked Examples

Take a $1,200,000 home in a municipality that charges the full additional local tax:

State tax on the first $800,000: $800,000 × 0.75% = $6,000
State tax on the next $400,000: $400,000 × 1.25% = $5,000
Base municipal tax: $1,200,000 × 0.25% = $3,000
Additional municipal tax: $1,200,000 × 0.25% = $3,000
Total: $17,000

A $4,000,000 residential sale in the same town crosses into the top tier:

State tax on the first $800,000: $6,000
State tax on $800,001 to $2,500,000: $1,700,000 × 1.25% = $21,250
State tax on $2,500,001 to $4,000,000: $1,500,000 × 2.25% = $33,750
Base municipal tax: $10,000
Additional municipal tax: $10,000
Total: $81,000

A commercial property at that same $4,000,000 price pays a flat 1.25% state rate ($50,000) plus $20,000 in municipal portions for $70,000. The residential marginal tiers don’t apply.

Exemptions

Connecticut exempts a fairly wide set of transfer types from the conveyance tax.⁴ The ones that come up most often:

Deeds between spouses
Any deed where the state, a political subdivision, or a government agency is a party
Transactions where the total consideration is under $2,000
Mortgages and releases of mortgage liens
Deeds made under a Superior Court decree in a dissolution proceeding
Transfers that change the form of ownership without changing beneficial ownership, such as moving property from personal ownership into a single-member LLC you control
Deeds made under a court-ordered foreclosure sale or loss mitigation judgment
Deeds executed as part of a corporate merger
Deeds to a nonprofit that holds undeveloped land in trust for conservation or recreation
Transfers of an underwater principal residence where the sale price can’t cover the existing mortgages and municipal liens

One common misconception: sales of property from an estate are not on the exempt list. If an executor sells estate property, the conveyance tax applies like any other sale. The statute also doesn’t exempt deeds that correct errors in previously recorded deeds, though a correction with no new consideration may fall outside the definition of a taxable conveyance in the first place.

Income Tax Credit on High-Value Residential Sales

Sellers who hit the 2.25% top tier can recover much of the extra tax through a Connecticut income tax credit, as long as they stay Connecticut residents. The credit equals one-third of the conveyance tax paid above the 1.25% rate on the consideration exceeding $800,000, claimed over three consecutive tax years beginning with the third year after the sale.⁵

On a $3,000,000 sale, the extra tax from the top tier (2.25% instead of 1.25%) on the $500,000 above $2.5 million is $5,000. That would produce roughly $1,667 in credit per year over three years. Any unused portion carries forward for up to six additional tax years. If you leave the state, you lose the remaining credit; the mechanism was built to discourage that exit.

Filing and Recording

The return is Form OP-236, filed either through Connecticut’s myCTREC online portal or on paper. The seller, their attorney, or an authorized agent prepares it.⁶

The return and payment go to the town clerk in the municipality where the property sits, at the time the deed is recorded. No deed is recorded without a completed OP-236 and full payment of the tax reported due.² Paper filers submit both pages of the OP-236 with a check payable to the Commissioner of Revenue Services; myCTREC lets the clerk approve the return digitally and forwards payment to DRS.⁷

Because the town clerk won’t record without full payment, the practical risk isn’t nonpayment. It’s underpayment: misclassifying the property type, missing the municipal add-on, or applying the wrong tier. Underpaid amounts draw penalties and interest, and while the Commissioner of Revenue Services can waive penalties for reasonable cause, that’s not a plan.

When the Sale Is of an Entity, Not a Deed

Selling a controlling interest in a business entity that owns Connecticut real estate is also taxable. The rate is 1.11% of the present true and actual value of the Connecticut real property the entity holds, paid by the person selling the controlling interest.⁸ The same $2,000 threshold applies. Investors and developers who hold property through LLCs or corporations can’t avoid the conveyance tax by selling the entity instead of the deed. They just trigger a different version of it.

Federal Tax Treatment

Connecticut’s conveyance tax is not deductible as a real estate tax on your federal return. The IRS specifically lists transfer and stamp taxes among the items that don’t qualify.⁹ It still matters for federal purposes: for a seller, the conveyance tax reduces the amount realized on the sale, and for a buyer who pays it, the tax gets added to cost basis. Both affect gain when the property is eventually sold.

If the seller is a foreign person or entity, the buyer generally has to withhold 15% of the gross sale price under FIRPTA and send it to the IRS, on top of the Connecticut conveyance tax.¹⁰ The 15% withholding is waived if the sale price is $300,000 or less and the buyer intends to use the property as a personal residence for at least half the year during each of the first two years after closing. Foreign sellers who expect their actual liability to be less than 15% can apply for a withholding certificate on Form 8288-B before or on the sale date. If the IRS hasn’t acted by closing, the buyer must still withhold the full 15%, though it can be held rather than remitted immediately until the IRS issues its determination.¹¹

1
Justia. Connecticut Code 12-494 – Imposition of Tax on Conveyances of Real Property for Consideration
2
Justia. Connecticut Code 12-497 – Payment of Tax and Filing of Return Condition Precedent to Recording
3
Connecticut General Assembly. Real Estate Conveyance Tax
4
Justia. Connecticut Code 12-498 – Exempt Transactions
5
Justia. Connecticut Code 12-704c – Credits for Taxes Paid
6
Connecticut State Department of Revenue Services. Instructions for OP-236 Connecticut Real Estate Conveyance Tax Return
7
Connecticut State Department of Revenue Services. Real Estate Conveyance Tax Forms
8
Justia. Connecticut Code 12-638b – Tax on Transfer of Controlling Interest
9
Internal Revenue Service. Publication 530, Tax Information for Homeowners
10
Internal Revenue Service. FIRPTA Withholding
11
Internal Revenue Service. Reporting and Paying Tax on U.S. Real Property Interests