Buying Your First Home in CT: Tax Checklist

Buying your first home in Connecticut? This first-time homebuyer tax checklist covers what changes once you own, what to keep from closing, and what to think about before you buy. Checked November 3, 2026.

For general education only. Not tax, legal, insurance, or investment advice, and not a promise of any result. Tax rules and due dates change, so confirm with the IRS (irs.gov), the CT Department of Revenue Services (portal.ct.gov/DRS) or your town before you act, and ask your tax preparer about your own situation.

What changes for your taxes

Mortgage interest, including points you pay as the buyer, can be an itemized deduction on Schedule A. Your lender reports it on Form 1098 (IRS Topic 505).
Town property taxes may be deductible if you itemize, subject to the federal cap on state and local taxes. Whether itemizing beats the standard deduction is worth checking with your tax preparer.
When you sell someday: up to $250,000 of gain on a main home ($500,000 joint) may be excluded if you meet the rules (IRS Topic 701).

What to do before December 31, 2026

To do Keep your closing disclosure (settlement statement) with your permanent records.
To do Watch for Form 1098 from your lender in January.
To do Find out when your town's tax bills are due and whether your lender pays them from escrow.
To do Keep receipts for improvements. They can matter when you sell.
To do Moved? Update your address with the IRS (Form 8822) and your employer.

The Connecticut side

CT's property tax credit (up to $300 per return) covers property tax on your primary residence and car, but only for residents 65 or older or those claiming a dependent, with income limits (CT-1040 instructions).
Connecticut's state housing finance agency, CHFA, publishes first-time homebuyer programs and education.

Thinking about buying a home?

Keep two years of tax returns and W-2s handy; lenders usually ask for them. If you are self-employed, lenders often look at your Schedule C profit, not your revenue.
Taking money from an IRA for a down payment? There's an exception from the 10% early-withdrawal additional tax for up to $10,000 used for a qualified first-time home purchase. It applies to IRAs, not 401(k) plans, and income tax may still apply (IRS). Talk with your tax preparer before touching retirement money.
File any missing returns and settle any balance with the IRS or CT DRS first. Unfiled returns and tax debts can slow down a mortgage.

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Frequently asked questions

Can first-time homebuyers deduct mortgage interest?

If you itemize deductions, qualified mortgage interest, including points paid as the buyer, can be deductible on Schedule A. Your lender reports it on Form 1098.

Are Connecticut property taxes deductible?

Town property taxes may be deductible on your federal return if you itemize, subject to the cap on state and local taxes. CT also has a property tax credit of up to $300 for residents who are 65 or older or claim a dependent, within income limits.

Can I use my IRA for a first home without the 10% penalty?

The IRS allows an exception from the 10% additional tax for up to $10,000 from an IRA used for a qualified first-time home purchase. Income tax may still apply, and it doesn't apply to 401(k) plans.

Sources (Checked November 3, 2026)

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