How Much Tax You’ll Pay in Connecticut

Connecticut’s tax structure includes income, sales, and property taxes, along with other charges, designed to fund state and local services. Understanding these levies provides insight into the state’s approach to balancing revenue generation with taxpayer capacity.

Understanding Connecticut’s Individual Income Tax

Connecticut operates a progressive individual income tax system. For the 2024 tax year, the state’s income tax rates range from 2.00% to 6.99% across seven brackets. The two lowest tax rates were recently reduced to 2.00% and 4.50%. For example, a single filer’s first $10,000 of taxable income is taxed at 2.00%, while income between $10,001 and $50,000 is taxed at 4.50%.

Income subject to Connecticut income tax includes wages, salaries, interest, dividends, business income, and capital gains. Taxpayers must file a Connecticut income tax return if their gross income exceeds certain thresholds, which vary by filing status, such as $15,000 for single filers or $24,000 for married couples filing jointly.

Residency status determines income tax obligations. A person is considered a Connecticut resident for tax purposes if they were domiciled in the state for the entire tax year, or if they maintained a permanent place of abode in Connecticut for the entire year and spent more than 183 days within the state during that year. Residents are taxed on all their income, regardless of where it was earned. A “permanent place of abode” refers to a residence continuously maintained by an individual, even if not owned, while “domicile” signifies one’s permanent legal home.

Nonresidents are taxed only on income derived from Connecticut sources, such as income from a Connecticut business or real estate. Part-year residents, who change their legal residence into or out of Connecticut during the tax year, are taxed on income earned while a resident and any Connecticut-sourced income. For higher income earners, the benefit of the lowest tax rates may phase out, and additional benefit recapture provisions can apply, leading to a higher effective tax rate on their adjusted gross income.

Connecticut offers deductions, exemptions, and credits that can reduce a taxpayer’s liability. A personal exemption is available, which reduces the amount of income subject to tax. Connecticut does not provide standard or itemized deductions similar to those at the federal level.

The state’s Earned Income Tax Credit (EITC) is a fully refundable credit, calculated as 40% of the federal earned income credit for which a taxpayer qualifies. To be eligible for the Connecticut EITC, individuals must qualify for the federal EITC and be full-year residents of the state. Income thresholds for the federal EITC, upon which the state credit is based, vary by family size; for instance, in 2024, families with three or more qualifying children must have earned and adjusted gross income below $59,899 ($66,819 if married filing jointly).

Taxpayers may also claim a property tax credit against their Connecticut income tax liability. For the 2024 tax year, this credit is capped at $300 per tax return and applies to qualifying property taxes paid on a primary residence, a privately owned motor vehicle, or both. Eligibility for this credit is also subject to adjusted gross income (AGI) limitations, such as an AGI below $109,500 for single filers or $130,500 for married couples filing jointly.

Connecticut provides exemptions for Social Security benefits and certain pension or annuity income. For 2024, individuals or married couples filing separately with an AGI below $75,000, and joint filers or heads of household with an AGI below $100,000, can deduct 100% of their federally taxable Social Security income. If AGI exceeds these thresholds, a partial deduction applies, ensuring no more than 25% of total Social Security benefits are subject to state income tax. For pension and annuity income, including certain IRA distributions, a full exemption is available for single filers with AGI below $75,000 and joint filers below $100,000. For those exceeding these income levels, a gradually reduced exemption applies, with the deduction for IRA income specifically phasing in to 100% by 2026.

Connecticut Sales and Use Tax

Connecticut levies a statewide sales tax on most goods and certain services. The general sales and use tax rate is 6.35%. Connecticut does not impose additional local sales taxes, maintaining a uniform rate across all municipalities.

Many tangible personal goods are subject to this sales tax, as are various services including computer and data processing services, advertising and public relations services, and car wash services. Certain items are exempt from sales tax, including most groceries, prescription medications, and clothing/footwear priced at $1,000 or less per item.

The use tax complements the sales tax, applying to purchases made outside Connecticut for use within the state if no sales tax was collected. If an item is bought online from an out-of-state retailer that does not collect Connecticut sales tax, the buyer is responsible for remitting the equivalent use tax directly to the state. The use tax rates mirror the sales tax rates, applying the same percentages to taxable goods and services.

Beyond the general rate, Connecticut has specific, higher sales tax rates for certain categories of goods and services:
Meals and certain beverages: 7.35%.
Luxury items (e.g., most motor vehicles exceeding $50,000, jewelry over $5,000, and clothing or footwear with a sales price over $1,000): 7.75%.
Rental or leasing of a passenger motor vehicle for 30 consecutive calendar days or less: 9.35%.

Room occupancy taxes also apply to short-term stays in hotels, motels, and bed and breakfast establishments. For hotels and lodging houses, a 15% rate applies, while bed and breakfast establishments are taxed at 11%. This room occupancy tax applies to stays of 30 consecutive calendar days or fewer and is levied in place of the general sales tax on these accommodations.

Property Taxes in Connecticut

Property taxes in Connecticut are levied at the local municipal level rather than by the state government. This localized approach means that property tax rates can vary substantially from one city or town to another, reflecting the diverse budgeting and service needs of individual communities. Property tax revenue forms a substantial portion of local budgets, funding essential public services such as schools, road maintenance, and emergency services.

The calculation of property tax bills involves the assessed value of the property and the local “mill rate”. A mill represents $1 in tax for every $1,000 of assessed value. To determine a property’s tax bill, the assessed value is divided by 1,000 and then multiplied by the mill rate. For instance, a home with an assessed value of $200,000 in a town with a mill rate of 30 would incur a property tax of $6,000 ($200,000 / 1,000 30).

A property’s assessed value in Connecticut is set at 70% of its fair market value. Fair market value is determined by local assessors, often based on recent sales data of comparable properties, and revaluations occur at least once every five years to reflect changes in market conditions. This assessment ratio ensures that taxes are based on a consistent proportion of a property’s estimated market worth.

Motor vehicles are also subject to local property taxes in Connecticut. Similar to real estate, motor vehicles are assessed at 70% of their depreciated value. This depreciated value is calculated using the Manufacturer’s Suggested Retail Price (MSRP) and a statutory depreciation schedule, with the assessed value decreasing automatically over time. The local mill rate is then applied to this assessed value to determine the motor vehicle tax bill. Motor vehicle mill rates are set by individual municipalities and can differ from the rates applied to real property, though state law caps these combined rates at 32.46 mills.

State law mandates that municipalities offer certain property tax relief programs. These programs often benefit specific groups, such as seniors, veterans, or individuals with disabilities. They typically include abatements, exemptions, or deferrals designed to reduce the property tax burden for eligible homeowners. For example, the Circuit Breaker Program provides a property tax reduction for older adults and individuals with permanent disabilities, with potential reductions up to $1,250 for married couples.

Other Notable Connecticut Taxes

Beyond income, sales, and property taxes, Connecticut imposes several other taxes that can affect residents and transactions. These taxes contribute to the state’s overall revenue.

The Motor Vehicle Fuels Tax, commonly known as the gas tax, is levied on each gallon of fuel sold in the state. As of recent rates, this tax is 25 cents per gallon of gasoline. This revenue typically helps fund transportation infrastructure projects across Connecticut.

The Real Estate Conveyance Tax is imposed on the transfer of real property at the time of sale. This tax has both a state and a municipal component, and it is generally paid by the seller. The state portion of the tax is tiered: 0.75% on the first $800,000 of the sales price for residential property, 1.25% on the portion exceeding $800,000 up to $2.5 million, and 2.25% on the portion above $2.5 million. Municipal rates typically range from 0.25% to 0.5%, depending on the specific town.

Connecticut also has its own Estate and Gift Tax. This unified tax applies to the value of an estate and lifetime gifts that exceed a certain threshold. For 2024, the exemption amount is $13.61 million, aligning with the federal estate tax exemption. Any amount exceeding this threshold is subject to a flat tax rate of 12%.