2025 Connecticut Tax Guide: A Comprehensive Overview of State Tax regulations

Connecticut, known for its beautiful coastline and historic towns, also has a unique tax system that residents should be aware of. Here's a breakdown of some key tax-related facts in the Nutmeg State.

Income Tax

Connecticut has a graduated state individual income tax rate, ranging from 2% to 6.99%. However, the state income tax rates generally stay below 7%.

For pension and annuity income, residents can expect to pay varying rates up to 6.99% in 2026. But there are specific exemptions for certain types of retirement income for residents aged 62 and older. Moreover, 75% of income from IRA distributions will become completely tax-exempt for eligible taxpayers in 2026. Income from an annuity or pension is tax-exempt for joint filers with less than $100,000 of federal adjusted gross income and other taxpayers with less than $75,000 of federal AGI.

Good news for many Connecticut residents: Social Security benefits are tax-exempt for single and married filing separate filers with an AGI below $75,000. Joint and head of household filers won't have their Social Security benefits taxed as long as their AGI falls below $100,000.

Estate and Gift Taxes

Connecticut imposes both an estate tax and a gift tax, but they only apply to gifts and estates worth more than $13.61 million. The tax rate for these is 12%.

Property Tax

The average effective property tax rate in Connecticut is 1.48%, higher than the national average. To help offset this, Connecticut offers property tax credits of up to $1,250 to eligible homeowners. To qualify, homeowners must be 65 years old, with homeowners with disabilities eligible under the age of 65.

Sales Tax

Connecticut's statewide sales tax is 6.35%, and localities don't charge any additional sales tax. The tax on cigarettes in Connecticut is $3.90 per pack, and other tobacco taxes are 50% of the wholesale price. The tax on wine in Connecticut is $0.72 per gallon, beer is taxed at $0.24 per gallon, and liquor is taxed at $5.40 per gallon.

Gasoline and Diesel Taxes

The gasoline tax in Connecticut is $0.25 per gallon, while the diesel tax is $0.50 per gallon.

Property Tax Credit Program

To qualify for Connecticut's property tax credit program, homeowners must be 65 years old, with homeowners with disabilities eligible under the age of 65. Married homeowners can receive a credit of up to $1,250, and other homeowners can receive up to $1,000.

Lower Tax Rates

Some residents will see lower tax rates starting next year. For more detailed information, it's recommended to consult with a tax professional or visit the official Connecticut Department of Revenue Services website.