What Percentage of Taxes Are Taken Out in CT?

Connecticut residents navigate a tax landscape encompassing various state and local levies on income, purchases, and property. These taxes contribute to funding public services and infrastructure across the state.

Connecticut Income Tax

Connecticut employs a progressive income tax system, meaning higher income levels are subject to higher marginal rates. For the 2024 tax year, individuals are subject to seven tax brackets, with rates ranging from 2.00% to 6.99%.

For single filers, the initial $10,000 of taxable income is taxed at 2.00%, while income between $10,001 and $50,000 is taxed at 4.5%. The rate then rises to 5.5% for income from $50,001 to $100,000, and 6.0% for income between $100,001 and $200,000. Higher income tiers see rates of 6.5% for $200,001 to $250,000, 6.9% for $250,001 to $500,000, and 6.99% for income exceeding $500,000. For married couples filing jointly, these income thresholds are generally doubled, while the marginal tax rates remain consistent.

Various types of income are subject to Connecticut income tax, including wages, salaries, business income, interest, and dividends. Capital gains are also taxed at the same rates as ordinary income. Residents are taxed on all income, regardless of its source, while non-residents are taxed only on income derived from Connecticut sources.

Several deductions and credits can reduce a taxpayer’s Connecticut income tax liability. A personal exemption is available that phases out at certain adjusted gross income levels. A property tax credit, up to $300, can be claimed by eligible homeowners who pay property taxes. The Connecticut Earned Income Tax Credit (CT EITC) mirrors the federal credit and provides relief for low to moderate-income working individuals and families.

For retirees, specific deductions apply to pension and annuity income, with a 100% deduction available for those whose federal adjusted gross income falls below certain thresholds ($75,000 for single filers, $100,000 for married filing jointly). Additionally, 50% of individual retirement account (IRA) distributions are deductible for the 2024 tax year, with this deduction increasing to 100% by 2026. Social Security benefits may also be fully deductible for taxpayers below certain income levels. A deduction for student loan interest paid, up to $2,500, is also available to eligible taxpayers.

Connecticut Sales and Use Tax

Connecticut imposes a statewide sales and use tax at a uniform rate of 6.35%. Connecticut does not permit local sales taxes, ensuring a consistent rate across all municipalities. This tax applies to the retail sale, lease, or rental of most goods and certain services.

While many items are subject to the standard sales tax, various exemptions exist. Most food products intended for home consumption, such as groceries, are exempt from sales tax. Prescription drugs and nonprescription medicines are also not subject to sales tax. Additionally, most clothing and footwear priced under $100 are exempt, though items priced at $1,000 or more are subject to a higher rate of 7.75%.

The “use tax” complements the sales tax and applies to items purchased outside Connecticut but brought into and used within the state. This tax is due when Connecticut sales tax was not collected by the out-of-state seller. The use tax rate is identical to the sales tax rate.

Connecticut Property Taxes

Property taxes in Connecticut are primarily levied at the local level by individual cities and towns, rather than by the state government. Property tax rates vary significantly from one municipality to another.

The calculation of property tax liability involves two key components: the “assessed value” of the property and the “mill rate.” A property’s assessed value is determined by the local tax assessor and, by state law, is typically 70% of its fair market value. For example, a home with a market value of $300,000 would have an assessed value of $210,000.

The “mill rate,” or “mil rate,” represents the amount of tax payable per $1,000 of assessed value. To calculate the annual property tax bill, the assessed value of the property is divided by 1,000 and then multiplied by the mill rate. For instance, an assessed value of $210,000 in a town with a mill rate of 30 would result in an annual property tax of $6,300 ($210,000 / $1,000 30).

Property taxes generally apply to real estate, including homes and land, and also to motor vehicles. While the state’s average effective property tax rate on owner-occupied housing has been noted around 1.92% to 2.00%, it is crucial to remember the wide variation in rates across different towns. Some state-mandated exemptions or credits may reduce property tax burdens for specific groups, such as veterans or the elderly, though these vary by local program.

Other Notable Connecticut Taxes

Motor vehicle property tax is a significant local tax, assessed annually by municipalities. This tax is based on the vehicle’s assessed value, which is typically 70% of its market value, similar to real estate property taxes. The mill rate of the town where the vehicle is registered is then applied to this assessed value to determine the tax owed.

The real estate conveyance tax is imposed when real property is sold and is typically paid by the seller. The state component of this tax for residential properties is tiered: 0.75% on the first $800,000 of the sales price, 1.25% on the portion between $800,000 and $2.5 million, and 2.25% on any amount exceeding $2.5 million. In addition to the state tax, many municipalities levy their own conveyance tax, generally at a rate of 0.25% of the sales price, with some communities charging 0.5%.

Connecticut also imposes an estate tax on the transfer of wealth upon death. For 2024, estates valued over $9 million are subject to this tax. The estate tax rates are progressive, ranging from 7.2% to 12% depending on the estate’s total value. While a gift tax is not separately defined, transfers of wealth during life may be considered part of the taxable estate for threshold calculations. These taxes primarily affect larger estates and significant wealth transfers.

Consumers also pay excise taxes on certain goods and services. The state gasoline tax is 25 cents per gallon. For diesel fuel, the tax rate is higher, set at 52.4 cents per gallon as of July 1, 2024. Additionally, a state excise tax is applied to cigarettes, currently at $4.35 per pack.