Substitute Bill No. 6876 proposes the establishment of first-time homebuyer savings accounts in Connecticut, effective January 1, 2026. The bill defines key terms such as "account holder," "qualified beneficiary," and "eligible costs," which encompass down payments and allowable closing costs for purchasing a one-to-four family residence. Individuals can open these accounts with financial institutions, and contributions can be made by various parties, including employers. The bill mandates that funds in these accounts must be used exclusively for eligible costs, imposing penalties for improper withdrawals. Additionally, it introduces tax benefits for contributions made to these accounts, allowing individuals to claim deductions based on their filing status, and provides a tax credit for employers who contribute to their employees' accounts.

The legislation also includes significant amendments to existing tax laws, particularly concerning the treatment of various income sources and deductions. It repeals and replaces specific language in the tax code to clarify the tax treatment of income types, including certain federal income tax-exempt income and specific allowances related to Social Security benefits. The bill allows for the exclusion of a percentage of distributions from individual retirement accounts (IRAs) from gross income, with specific thresholds set for different income brackets. Overall, the bill aims to facilitate homeownership for first-time buyers while providing tax relief and incentives for individuals and employers, thereby addressing the unique financial needs of low- to moderate-income families.

Statutes affected:
Raised Bill: 12-701
BA Joint Favorable Substitute: 12-701
File No. 189: 12-701
FIN Joint Favorable: 12-701