Connecticut Tax and CPA Services: State, County and City Taxes

Connecticut sits between New York and Massachusetts, so many residents and workers cross state lines every day, and its tax rules reward careful attention: seven income tax brackets, a Social Security exemption that depends on income, an optional entity-level tax for pass-through businesses and sales tax rates that change by category. This guide covers what residents, remote workers, employers and business owners need to know. We serve Connecticut clients remotely from our Naperville, Illinois office.

Individual income tax

For 2025, Connecticut's tax calculation schedule for single filers applies 2 percent to the first $10,000 of income, then 4.5 percent up to $50,000, 5.5 percent up to $100,000, 6 percent up to $200,000, 6.5 percent up to $250,000, 6.9 percent up to $500,000 and 6.99 percent above that, with separate, wider brackets for joint filers. Residents file Form CT-1040, and nonresidents and part-year residents file CT-1040NR/PY, both through the myconneCT system.

Social Security and pensions. Connecticut generally starts from federal adjusted gross income and then allows subtractions. Federally taxable Social Security benefits are fully exempt if you file as single or married filing separately and your Form CT-1040, line 1 amount is under $75,000, or as married filing jointly, qualifying surviving spouse or head of household and it is under $100,000. Above those amounts, the benefits are partially exempt, and a worksheet figures the adjustment. Pension and annuity income gets its own subtraction, with a worksheet in the instructions and a separate rule for retired teachers.

Credits. Starting with 2025, a taxpayer eligible for the Connecticut earned income tax credit with at least one qualifying child can receive an additional $250.

PE tax credits. If you own part of a pass-through entity that paid Connecticut PE tax, you may claim a credit on your own return, and that credit counts when you figure whether you need to make estimated payments.

Connecticut also treats certain people working abroad as nonresidents under a rule involving a 548-day period and limited days in the state, so anyone with a Connecticut home and overseas work should review the instructions. Our multi-state tax service can walk through it.

Business taxes

The pass-through entity tax is optional. Partnerships and S corporations that do business in Connecticut or have Connecticut-source income may elect to file Form CT-PET and pay entity-level tax, and the election is annual and irrevocable. It is made by checking a box on a timely filed Form CT-1065/CT-1120SI. Owners then claim a credit, which makes it a common planning tool against the federal cap on state and local tax deductions; see SALT deduction and property taxes. Returns and payments must be filed electronically, and estimated payments are required in installments.

Corporations pay the corporation business tax on a combined unitary basis. The Department of Revenue Services reports that the 10 percent surtax has been extended through income years beginning in 2028, and that the cap on the amount of tax under combined unitary reporting no longer applies starting with income years beginning in 2025.

Sales and use tax

Connecticut's general rate is 6.35 percent on most goods, digital goods and taxable services. Several other rates exist: 7.35 percent on sales of meals and certain beverages, 7.75 percent on motor vehicles priced over $50,000, jewelry over $5,000, and clothing, footwear, handbags and similar items priced over $1,000, and 9.35 percent on short-term passenger vehicle rentals. A 1 percent rate applies to canned software that a business accesses or receives electronically for business use. Returns on Form OS-114 are filed and paid electronically. Because the luxury and meals rates are different from the general rate, retailers and restaurants need accurate point-of-sale settings; see our sales tax service.

Payroll in Connecticut

• Unemployment insurance: the Department of Labor states that for 2026 the taxable wage base rises to $27,000, the new employer rate is 1.9 percent, and contribution rates range from 1.1 to 9.9 percent after a 1.0 percent fund solvency rate. See state unemployment insurance.
• Paid leave: CT Paid Leave is funded by a 0.5 percent contribution deducted from employee pay up to the Social Security wage cap, held for 2026 by the program's board. Employers remit the contributions to the CT Paid Leave Authority. See state paid family and medical leave.
• Withholding: employees use Form CT-W4 and pension payers use CT-W4P. See state income tax withholding.

Towns, cities and local taxes

Connecticut has no county government, so towns, cities and boroughs carry local functions and rely heavily on property taxes. Property assessments and mill rates are set locally, and bills come from the town or city tax collector rather than the state revenue agency. Connecticut does not have local income taxes, but residents of border towns should consider how New York or Massachusetts rules apply to commuting and remote work. See our pages on the New York metro area and the neighboring state of Massachusetts.

How we can help

We prepare Connecticut resident, part-year and nonresident returns, check Social Security and pension subtractions, help pass-through businesses decide on the PE election, and set up payroll including paid leave remittance. If you receive a notice from the Department of Revenue Services, see state tax notices and representation. Contact us to talk it through; this page is general information.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.