Connecticut has enacted a new First-Time Home Buyer Savings Program designed to help residents save for homeownership while offering meaningful tax incentives to individuals and employers. The program was established under Act 25-1 (H.B. 8002), passed during the November 2025 Special Session, and becomes effective January 1, 2026.
Overview of the Program
Beginning with the 2027 tax year, eligible Connecticut residents will be able to deduct qualified contributions, interest, and certain withdrawals from a designated First-Time Home Buyer Savings Account. Additionally, employers who contribute to their employees’ accounts may qualify for a new business tax credit.
The program is intended to support first-time home buyers amid rising housing costs and encourage employers to participate in helping their workforce achieve homeownership.
Key Tax Benefits for Individuals
Individuals who open and contribute to a First-Time Home Buyer Savings Account may begin claiming tax deductions in the 2027 tax year. However, the program allows the 2027 deduction to include eligible contributions made as early as the 2026 tax year.
To qualify, account holders must meet federal adjusted gross income (AGI) limits:
- Single filers: AGI below $125,000
- Joint filers: AGI below $250,000
Eligible individuals may deduct:
- Annual contributions to the account, up to $2,500 for single filers or $5,000 for joint filers
- Accrued interest earned on the account
- Qualified withdrawals used by the account holder/beneficiary to pay or reimburse eligible first-time home buyer costs
Employer Tax Credits
Starting in the 2027 tax or income year, employers may receive a corporate business tax or personal income tax credit (excluding withholding tax) when they contribute to their employees’ First-Time Home Buyer Savings Accounts.
- The credit equals 10% of employer contributions,
- Capped at $2,500 per employee per year
This incentive provides employers an opportunity to support employee financial well-being while also benefiting from a state tax credit.
When Benefits Begin
Although the program is effective January 1, 2026, both deductions and credits first apply in the 2027 tax year. Importantly, contributions made in the 2026 tax or income year may still be counted toward the 2027 deduction or credit.
What This Means for Connecticut Residents and Employers
The First-Time Home Buyer Savings Program represents a significant step in supporting future homeowners and strengthening Connecticut’s workforce benefits landscape.
Individuals planning to purchase their first home can begin contributing to these accounts as early as 2026 to maximize future deductions. Employers may also wish to consider incorporating contributions into their benefits packages starting in 2026 to take full advantage of the 2027 credit.
Our team at Beers, Hamerman, Cohen & Burger, P.C. is available to help individuals and employers evaluate eligibility and plan ahead for these new opportunities. If you have questions about how this program may impact your tax planning, please contact us.