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 include down payments and allowable closing costs for purchasing a one-to-four family residence. It allows individuals to create these accounts with financial institutions, with contributions permitted from anyone, including employers. The bill mandates that account holders submit tax returns and account information to the Commissioner of Revenue Services for tax deduction and credit purposes. A civil penalty of ten percent is introduced for account holders who withdraw funds for non-eligible costs, although exceptions are made to ensure that appropriately used funds are not considered taxable income.

Additionally, the bill amends the existing tax code to clarify the treatment of various income types and deductions, including provisions for tax deductions on contributions to first-time homebuyer savings accounts, allowing unmarried individuals to deduct up to $2,500 and married couples up to $5,000 for contributions made during the taxable year. It also introduces a tax credit for employers contributing to these accounts, set at 10% of contributions with a cap of $2,500 per account holder. The bill repeals and replaces specific language in the tax code to provide clearer guidelines for taxpayers and ensure equitable treatment of certain income types, while also addressing the tax implications of various income sources, including IRA distributions and expenses related to organ donation. Overall, the legislation aims to facilitate homeownership for first-time buyers and provide tax relief for individuals and families in Connecticut.

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