Connecticut Issues Guidance on Conveyance Tax Credit

The Connecticut Department of Revenue Services has provided guidance stipulating that, due to changes made in the 2022 legislative session, taxpayers are eligible to claim a credit against individual income tax in taxable year 2023 based on real estate conveyance tax paid in connection with certain residential real estate in taxable year 2020. (TSSB 2024-5, 08/02/2024.)

Determination of eligibility for credit in taxable year 2023.

Certain taxpayers who pay conveyance tax at the rate of 2.25% prescribed in Conn. Gen. Stat. §12-494(b)(2)(C) may claim a tax credit against their income tax liability that is based on the amount of real estate conveyance tax paid at that rate pursuant to Conn. Gen. Stat. §12-704c(d). Eligible taxpayers may claim the tax credit over a three-year period, beginning in the third taxable year after the taxable year in which the taxpayer paid the conveyance tax. The tax rate set forth in Conn. Gen. Stat. §12-494(b)(2)(C) became effective July 1, 2020. Thus, the first year a taxpayer could have paid real estate conveyance tax at the rate set forth therein was in taxable year 2020. Accordingly, given the express requirement of Conn. Gen. Stat. §12-704c(d) that the credit can first be claimed in the “third taxable year after the taxable year in which such conveyance tax was paid,” the first taxable year in which said credit could be claimed is taxable year 2023.

Amount to be claimed.

Taxpayers who paid tax on or after July 1, 2020, and on or before December 31, 2020, are allowed to claim one third of the total credit in taxable year 2023. If an eligible taxpayer cannot use the full amount of the credit allowable in taxable year 2023, the taxpayer may carry the unused portion forward for up to six successive taxable years. Taxpayers are not eligible to receive a refund of any unused portion of a credit allowable under Conn. Gen. Stat. §12-704c(d).

Claiming the credit.

After completing Schedule CT-1040 REC, taxpayers are to follow the instructions set forth in the schedule. Additional guidance regarding the carry forward provisions relative to this credit are set forth in the instructions to Line 7 of Schedule CT-1040 REC.