Update to Real Estate Conveyance Taxes in Connecticut

Update to Real Estate Conveyance Taxes in Connecticut

It just got more expensive to sell a house in Connecticut!

A while ago, I wrote a post on Real Estate Conveyance Taxes and want to provide an update to that post.  The State of Connecticut increased the rate of the conveyance taxes that the seller must pay at closing, and that change will go into effect on 7/1/11.

There are exemptions from the real estate conveyance taxes for foreclosures, deeds in lieu of foreclosure, and most short sales. If you are in such a situation, please check with your attorney to clarify the fine print on all real estate conveyance taxes in Connecticut.

There are two parts to the conveyance tax: state portion and municipal portion.

State Portion of the Real Estate Conveyance Tax

The increase is essentially .25% more in taxes, bringing the state portion to .75% for residential properties under $800,000.  If the property sells for more that $800,000, the seller will pay .75% for the first $800,000 and 1.25% on the portion over $800,000.

Non-residential properties will pay 1.25% in the state portion, regardless of price.

Municipal Portion of the Real Estate Conveyance Tax

In addition to the state portion, sellers currently pay .25% to the municipality.  There are also targeted communities that are allowed to charge an additional .25%, bringing the total municipal real estate conveyance tax to .50%.  These targeted communities are Bloomfield, Bridgeport, Bristol, East Hartford, Groton, Hamden, Hartford, Meriden, Middletown, New Britain, New Haven, New London, Norwalk, Norwich, Southington, Stamford, Waterbury, and Windham.

Examples:

$350,000 home in West Hartford will pay $2625 ($350,000 x .0075) in state conveyance tax.  Prior to 7/1/11, this seller would pay $1750 in state conveyance tax.  The municipal portion is $875 ($350,000 x .0025) for a total tax bill of $3500.

$900,000 home in West Hartford will pay $6000 ($800,000 x .0075) and $1250 ($100,000 x .0125) for a total of $7250 in state conveyance tax.  The municipal portion is $2250 ($900,000 x .0025) for a total tax bill of $9500.

$900,000 commercial property in West Hartford will pay $11,250 in state conveyance taxes and $2250 in municipal taxes for a total tax bill of $13,500.

If these properties were located in Hartford, the total tax bills would be $4375, $11750, and $15750, respectively.

Sellers need to be aware that as of 7/1/11 they will be paying more in state real estate conveyance taxes.  We anticipate that the end of June will be busier than usual as people try to avoid extra taxes.  Please plan accordingly!