Sellers on Candlewood ask what they will actually net long before they ask anything else. The conveyance tax is one of the few line items that is knowable to the dollar in advance, and it is one most people estimate wrong, because they use the wrong rate on the whole price.
There are two taxes, not one
Connecticut General Statutes Sec. 12-494 imposes a tax on the conveyance itself, and splits it. One part goes to the state, the other to the municipality where it is paid. It applies when the consideration "equals or exceeds two thousand dollars," so on any ordinary arm's length sale it applies. Sec. 12-498 then lists exempt transactions, including deeds between spouses and deeds made pursuant to a Superior Court decree, so a transfer inside a family or out of a divorce is a different question.
The municipal portion is straightforward: "one-fourth of one per cent of the consideration," meaning 0.25 percent, which becomes general revenue of the town.
The state portion is where people get it wrong.
The state rate is tiered, and only the top slice pays the higher rate
The base state rate is "three-quarters of one per cent," or 0.75 percent. For a residential estate where the consideration is eight hundred thousand dollars or more, Sec. 12-494(b)(2) sets it out in slices:
- 0.75 percent "on that portion of such consideration up to and including the amount of eight hundred thousand dollars"
- 1.25 percent "on that portion of such consideration in excess of eight hundred thousand dollars up to and including the amount of two million five hundred thousand dollars"
- 2.25 percent "on that portion of such consideration in excess of two million five hundred thousand dollars"
Note the words "on that portion." Crossing eight hundred thousand does not reprice the whole sale. It changes the rate on the amount above the line only. Sellers routinely assume the opposite and talk themselves into pricing decisions that are not real.
The statute also defines a residential estate broadly for this purpose, as "a primary dwelling and any auxiliary housing or structures, regardless of the number of deeds, instruments or writings used to convey such residential real estate." On a lake property with a cottage, a boathouse or a second structure, that phrase is worth knowing.
What that means in real numbers
Working the statute through, before any additional municipal tax:
- A $750,000 sale. State 0.75 percent on the whole amount, $5,625. Municipal 0.25 percent, $1,875. Total $7,500, an effective rate of 1.00 percent.
- A $1,200,000 sale. State 0.75 percent on the first $800,000 is $6,000, plus 1.25 percent on the next $400,000 is $5,000, so $11,000. Municipal $3,000. Total $14,000, an effective rate of 1.17 percent.
- A $2,800,000 sale. State $34,000 across all three slices. Municipal $7,000. Total $41,000, an effective rate of 1.46 percent.
The effective rate climbs with price, but far more gently than the headline 1.25 or 2.25 suggests, precisely because the higher rates only touch the top slice.
The extra municipal tax most sellers have never heard of
Subsection (c) allows certain municipalities to add more. A "targeted investment community" as defined in Sec. 32-222, or a municipality containing properties designated as manufacturing plants under Sec. 32-75c, "may impose an additional tax... at a rate of up to one-fourth of one per cent."
So the municipal share is 0.25 percent in most towns and can be up to 0.50 percent where that additional tax applies. This is a town by town question, and it is worth confirming with the town clerk for the specific municipality rather than assuming the base rate.
Who actually pays it
The statute does name the party. Sec. 12-494 imposes the tax on the deed, and Sec. 12-495 provides that "the tax imposed by this chapter shall be payable by the person conveying the property upon the recording of each such deed, instrument or writing." That is the seller, by statute rather than by custom. The Department of Revenue Services correspondingly requires the grantor, the grantor’s attorney or the grantor’s authorized agent to file Form OP-236. Buyer and seller can agree between themselves about who funds it, but that agreement does not move the statutory obligation, and it comes out of the proceeds at closing. It is collected by the town clerk when the deed is recorded, and Sec. 12-497 makes payment and filing a condition precedent to recording, which is why it is settled at the closing table rather than billed afterward.
The credit that can give some of the top tier back
This one matters on Candlewood, because the 2.25 per cent tier starts at $2.5 million and a good number of lake sales reach it. Connecticut allows a personal income tax credit against conveyance tax paid at that top rate. CGS Sec. 12-704c(d)(1) provides that for a taxpayer who paid at the top rate, the credit "shall not exceed thirty-three and one-third per cent of the amount of the conveyance tax paid in excess of one and one-quarter per cent on that portion of the consideration taxed under section 12-494 that is in excess of eight hundred thousand dollars, in each of the three taxable years beginning with the third taxable year after the taxable year in which such conveyance tax was paid." Subdivision (d)(2) adds a carryforward.
Read the timing, because it is the part that surprises people. The credit does not arrive in the year you sell. It begins in the third tax year after the sale and runs across three years, so it only helps a seller who is still filing a Connecticut income tax return then. A seller moving out of state is in a different position from one staying. Ask your accountant about it at the time of sale, not three years later when the first year is already gone.
One current change worth knowing
Subsection (d) provides that on and after July 1, 2025, revenue above three hundred million dollars in a fiscal year from this tax transfers from the General Fund to the Housing Trust Fund, and that on and after July 1, 2026 that threshold adjusts annually for inflation. It does not change what a seller pays. It changes where the money goes, and it is a reasonable signal that this tax is not about to get quietly cheaper.
That transfer is currently suspended. Public Act 26-68, Section 261, effective from passage, provides that "notwithstanding the provisions of section 12-494 of the general statutes, for the fiscal years ending June 30, 2026, and June 30, 2027, the Comptroller shall not make the revenue transfer described in subsection (d) of section 12-494 of the general statutes." Subsection (d) still reads as above, but the transfer is barred for those two fiscal years. Again, this changes nothing about what you pay at the closing table. It is worth knowing only so that you are not told a stale version of the story. This paragraph is written as of September 2026 and the suspension is written to lapse after the fiscal year ending June 30, 2027.
Common questions about the Connecticut conveyance tax
How much is the conveyance tax in Connecticut?
Two parts. The municipal portion is 0.25 percent of the price in most towns. The state portion is 0.75 percent as a base, and for a residential estate at eight hundred thousand dollars or more it is tiered: 0.75 percent on the portion up to $800,000, 1.25 percent on the portion above $800,000 up to $2,500,000, and 2.25 percent on the portion above $2,500,000. So a $1,200,000 sale runs about $14,000 in total before any additional municipal tax, an effective rate near 1.17 percent.
If I sell over $800,000, is the whole sale taxed at 1.25 percent?
No, and this is the most common misunderstanding. The statute applies the higher rate only "on that portion of such consideration in excess of eight hundred thousand dollars." The first $800,000 stays at 0.75 percent. Crossing the threshold raises your marginal rate, not your entire bill, so a sale at $810,000 pays $125 more in state tax than a sale at $800,000. Only the extra $10,000 is taxed at 1.25 per cent, and 1.25 per cent of $10,000 is $125.
Does the buyer or the seller pay it?
The seller, and by statute rather than by custom. Sec. 12-494 imposes the tax on the deed and Sec. 12-495 makes it "payable by the person conveying the property." DRS requires the grantor or the grantor’s attorney or agent to file Form OP-236. A contract can shift who funds it, but not who owes it. It is paid at closing from the proceeds. The town clerk collects it when the deed is recorded, and under Sec. 12-497 payment and filing the return are a condition of recording, so it is settled at the closing table rather than billed later.
Do all towns charge the same municipal rate?
No. The base municipal rate is 0.25 percent, but subsection (c) permits a targeted investment community, or a municipality containing designated manufacturing plants, to impose an additional tax of up to 0.25 percent on top. That means the municipal share can reach 0.50 percent in some places. Confirm the rate with the town clerk for the specific municipality before you rely on a number.
Does the tax apply to a lake cottage plus a second structure?
The tiered residential rate is written to reach "a residential estate, including a primary dwelling and any auxiliary housing or structures, regardless of the number of deeds, instruments or writings used to convey such residential real estate." That language matters on lake properties, where a main house, a guest cottage or a boathouse may be conveyed together. Splitting a sale across multiple instruments does not by itself avoid the aggregate treatment.
Related reading: your purchase price does not become your assessment, how the five lake towns compare on mill rates, and when your Candlewood town revalues next.
More on this area: Candlewood Lake waterfront overview.
Every figure here keys off the sale price, so if you do not have a current one, start with a valuation on your property. If you are weighing a sale on Candlewood and want the net, not just the price, reach me through ConnorCTHomes.com.
Connor Kostyra, Licensed Real Estate Salesperson, CT Lic. RES.0836348.
Connor CT Homes is a marketing brand. Real estate services are provided through RE/MAX Rise, 1297 Main Street, Watertown, CT 06795.
This article is general information, not legal or tax advice. Rates are quoted from Connecticut General Statutes Sec. 12-494 and can be amended. Confirm the current rate and the municipal rate for a specific town with the town clerk and a Connecticut real estate attorney or tax adviser.
