Updated October 7, 2026. Quick answer: Generally no, if you qualify for the federal exclusion. The 2025 Form CT-1040 instructions begin with “Enter your federal adjusted gross income from your 2025” federal return, which leaves out a gain excluded under section 121. Gain above it is taxed at graduated rates up to 6.99%, and the seller pays a state conveyance tax on the deed.
Connecticut tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Starts from federal adjusted gross income, which excludes a gain excluded under section 121 (the instructions do not mention section 121) |
| Rate on gain above the exclusion | Graduated: 4.5% of the excess over $10,000 in the middle brackets, up to 6.99% of the excess over $500,000 (single schedule) |
| Collected at the sale | Seller-paid state conveyance tax (Form OP-236): 0.75% up to $800,000, 1.25% to $2,500,000, 2.25% above, for residential property; no income tax withholding shown for a resident seller |
| Source | Connecticut Department of Revenue Services |
What the Connecticut documents say
The 2025 Form CT-1040 instructions start from “Enter your federal adjusted gross income from your 2025” federal Form 1040. Under the federal statute, “Gross income shall not include gain from the sale or exchange” of a principal residence that meets the ownership and use tests, so an excluded gain never enters federal adjusted gross income. That is reasoning from two documents. The instructions print no separate Connecticut home-sale rule.
The instructions print the rate schedule for single filers: “$200 plus 4.5% of the excess over $10,000” in the middle brackets, and at the top “$31,250 plus 6.99% of the excess over $500,000”.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in Connecticut sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so it is not in federal adjusted gross income and, on the documents read, $0 is taxed by Connecticut. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000, which is taxed at the graduated rates; this page computes no tax because the bracket depends on the rest of the return.
What is collected at the sale
Connecticut also charges the seller a state conveyance tax, reported on Form OP-236. The Department’s page says it applies when consideration “equals or exceeds two thousand dollars”. For residential property the Department’s change notice lists “Up to and including $800,000: 0.75%”, then 1.25% from $800,000 to $2,500,000 and 2.25% above $2,500,000. That notice is dated 2019 and the current page prints no rates, so check the current rate with the Department. The pages read show no income tax withholding on a resident’s sale.
What changes in 2026
The documents read for Connecticut announce no change for 2026 that is specific to the tax on a home sale. The forms and instructions read are for tax year 2025 or the newest page archived; check the state agency for 2026 forms when they are published.
What the documents do not say
- The instructions do not mention section 121, so conformity is reasoned from the federal starting point. The conveyance rates come from a 2019 notice and municipal conveyance taxes were not read. The rate schedule is for tax year 2025.
Common mistakes
- Treating the conveyance tax as a tax on your profit; it is computed on the consideration, not on gain.
- Using the 2019 conveyance rates without checking the Department for the current ones.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how Connecticut taxes capital gains, Connecticut retirement taxes, and home sale exclusion calculator.
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Answer againSources
- Form CT-1040 Instructions (Rev. 12/25): https://portal.ct.gov/-/media/drs/forms/2025/income/2025-ct-1040-instructions_1225.pdf
- Real Estate Conveyance Tax Change: Effective July 1, 2019: https://portal.ct.gov/DRS/Legislative-Summaries/2019-Legislative-Updates/Real-Estate-Conveyance-Tax-Change
- Real Estate Conveyance Tax Information: https://portal.ct.gov/DRS/Individuals/Individual-Income-Tax-Portal/Real-Estate-Conveyance-Taxes/Tax-Information
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.