Connecticut Tax Rates

This post provides an overview of the primary taxes levied at the state level in Connecticut. The information contained here is intended for general reference. For individuals or businesses seeking comprehensive support with tax filings, compliance, or strategic planning, indinero offers expert services. We encourage all who utilize this summary to explore the tailored tax support available through indinero.

Individual Income Tax

Connecticut uses a graduated individual income tax system, featuring seven marginal tax brackets.

  • Tax Rates: Rates range from a low of 2.00% to a top marginal rate of 6.99%. Recent legislation has lowered the rates for the bottom two brackets.
  • Brackets and Thresholds: The lower rates apply to the first few thousands of taxable income, and the top rate of 6.99% applies to income over $500,000 for single filers and over $800,000 for married couples filing jointly.
  • Property Tax Credit: Connecticut allows residents to claim a credit against their state income tax liability for a portion of the property taxes paid on their primary residence and/or a motor vehicle, which helps mitigate the high property tax burden.
  • Retirement Income: The state has provisions that allow for the exemption of a significant portion of Social Security benefits and certain pension/annuity income for eligible taxpayers.

Sales and Use Tax

Connecticut levies a statewide sales and use tax, but it is unique because the state does not allow local sales taxes.

  • State Rate: The general state sales tax rate is 6.35% on the retail sale of most tangible personal property and certain services. Because there are no additional local sales taxes, this is the maximum general rate levied in the state.
  • Variable Rates: Connecticut applies different rates to certain items:
    • Meals and Prepared Foods: Taxed at a higher rate of 7.35%.
    • Luxury Goods: Certain items, such as most motor vehicles over $50,000 and certain jewelry/clothing items over $1,000, are taxed at 7.75%.
  • Exemptions: Essential items like groceries (unprepared food) and prescription drugs are exempt from the general sales tax.

Property Tax

While the state of Connecticut does not collect a statewide property tax, local taxes are among the highest in the nation. Property taxes are the primary source of revenue for municipal services and schools.

  • Assessment: Real property is assessed locally at 70% of its fair market value.
  • Millage Rate: Local property tax is calculated using a mill rate (or mill levy), which varies significantly by town. A mill represents $1 of tax for every $1,000 of assessed value.
  • Motor Vehicle Tax: Motor vehicles are considered personal property and are subject to the local property tax, which is calculated based on the vehicle’s market value.

Corporate Income Tax (Corporation Business Tax)

Connecticut imposes a tax on corporations for the privilege of carrying on a business in a corporate capacity in the state.

  • Base Rate: The standard corporate income tax rate is 7.5% of the corporation’s net income.
  • Minimum Tax and Surtax: Corporations must pay the greater of the calculated tax based on net income or a minimum tax of $250. Furthermore, a temporary 10% surtax on the tax liability is applied to certain large corporations with gross income exceeding $100 million, resulting in an effective rate of 8.25% for those entities.
  • Apportionment: For multi-state companies, Connecticut uses a single sales factor apportionment formula to determine the portion of income taxable by the state.

Unique Taxes: Pass-Through Entity Tax

Connecticut imposes a unique tax on business entities whose income would normally pass through to the owners’ individual tax returns.

  • Pass-Through Entity (PTE) Tax: This tax is levied at the entity level on partnerships, S corporations, and LLCs treated as partnerships for tax purposes. The rate is 6.99% of the entity’s income sourced to Connecticut.
  • Credit: Owners of the pass-through entity can claim a credit on their individual Connecticut income tax returns for their share of the PTE Tax paid by the business, which helps avoid double taxation and offers a workaround for the federal limitation on state and local tax (SALT) deductions.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.