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February 13, 2025

CT lawmakers eye first-time homebuyers savings account and tax deduction

HBJ PHOTO | DAVID KRECHEVSKY The State Capitol in Hartford.
By David Krechevsky

A bill to create a first-time homebuyer’s savings account and a related tax deduction is one proposal on the agenda for a public hearing Thursday to be held by the state legislature’s Banking Committee.

House Bill 6876 has bipartisan support; it was co-sponsored by Rep. Jill Barry (D-Glastonbury) and Rep. Tom Delnicki (R-South Windsor). Delnicki supported a similar bill that was not approved during last year’s legislative session.

The bill would establish a first-time homebuyer savings account and related tax deductions and credits, and would allow employers to claim tax credits for making contributions to their employees’ home ownership accounts. The bill also includes a 10% penalty if money from the account is used for anything other than a down payment on a home or closing costs.

“Many young adults want to own a home, but the upfront costs are beyond their reach,” Delnicki said in a news release last year. “This proposal is an innovative way to address Connecticut’s workforce and housing shortages by incentivizing Connecticut residents, with the help of their employers, to save for purchasing a home in Connecticut.”

State Treasurer Erick Russell submitted written testimony about the bill, seeking to have one section removed.

In his testimony, Russell states that, under the current bill, the accounts are limited to holding only cash, but have an option to invest in money market funds.

“Section 4 of the bill directs the treasurer to make recommendations to the Banking Committee on whether, and how, marketable securities could be held in a first-time homebuyer savings account,” Russell states. “As currently drafted, the bill could potentially allow these accounts to be invested in marketable securities, similar to a 401(k).”

He then states that the structure for these investments “should be determined by the capacity and offerings of each participating financial institution. Given that the ability to hold marketable securities in these accounts will depend on the financial institutions involved, any formal recommendations from the treasurer's office are unlikely to provide meaningful or actionable guidance.”

He then requests that Section 4 “be removed from the bill in its current form.”

The Connecticut Business & Industry Association (CBIA) submitted written testimony supporting the bill. Pete Myers, senior public policy associate for CBIA, said his organization believes the bill “will be particularly beneficial in attracting and retaining recent graduates, trade school graduates, and members of the armed services, encouraging them to build their futures in Connecticut.”

He noted that several other states, including Iowa and Oregon, have successfully implemented similar programs for first-time homebuyers.

“HB 6876 builds upon these models and takes a crucial next step
by incentivizing employer contributions,” Myers states. “This employer contribution component is a key differentiator and will boost program utilization.”

Jim Heckman, general counsel for the Connecticut Association of Realtors, also submitted testimony supporting the bill.

“The costs to purchase a home in Connecticut are significant and this proposal would provide a tax credit to employers and a tax deduction to employees who contribute to a first-time homebuyer’s savings account,” Heckman said. “This bill is a very proactive way to encourage savings for a home in a market demonstrating high demand and low inventory.”

He added that the association “applauds the proponents of the bill for creating this way to build generational wealth in Connecticut, which
can happen with a home purchase.”

In addition to the first-time homebuyer savings account bill, the Banking Committee will hear testimony on six other bills:

  • S.B. 1255, which would redefine “community bank” and “community credit union” to include those chartered outside of Connecticut.
  • S.B. 1256, which proposes changes to the regulation and oversight of certain financial institutions.
  • S.B. 1257, which proposes changes to regulations for consumer credit and commercial financing.
  • S.B. 6875, which proposes changes to the Connecticut Uniform Securities Act.
  • H.B. 6877, which would modify an exemption from a requirement that the state Banking Commissioner approve certain bank real estate improvements or alterations, and
  • H.B. 6878, which would limit the time period for foreclosing on a residential mortgage and shorten the time period for when a delinquent mortgage is deemed invalid as a lien.

The Banking Committee’s public hearing is set for 11 a.m. Thursday in Room 2A of the Legislative Office Building.

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