Connecticut has one of the more complex state income tax systems in the Northeast. Its graduated rates run from 2% to 6.99% on income above $500,000 for joint filers. Connecticut is one of the few states that taxes Social Security benefits, though an exemption is available for lower-income recipients. Connecticut also has its own separate estate tax - unlike New Jersey, which repealed its estate tax in 2018, Connecticut still imposes estate tax but with a higher exemption that has been increasing toward conformity with the federal amount. Connecticut's pass-through entity tax was one of the first in the country and remains a significant planning tool for business owners.
Income tax rates (MFJ brackets, approximate):
$0 - $20,000: 2% | $20,001 - $100,000: 4.5% | $100,001 - $200,000: 5.5% | $200,001 - $400,000: 6% | $400,001 - $500,000: 6.5% | Over $500,000: 6.99%
Social Security: Exempt for filers with federal AGI under $75,000 (single) or $100,000 (MFJ). Fully taxable above these thresholds.
Estate tax exemption: $15,000,000 for 2026 (matches federal basic exclusion under OBBBA P.L. 119-21 §70106; indexed annually after 2026).
Property tax credit: Up to $300 credit against Connecticut income tax for property taxes paid on a primary residence or motor vehicle.
Connecticut enacted one of the country's first mandatory pass-through entity taxes - it is not elective, it applies automatically to partnerships and S-corporations with Connecticut-source income. The entity pays Connecticut income tax at the entity level, and individual owners receive a credit on their personal returns. This effectively bypasses the federal $10,000 SALT cap for Connecticut business income. The mandatory nature of the Connecticut PTET distinguishes it from elective PTET programs in states like New York and California - Connecticut owners do not need to elect in; the entity-level tax applies automatically.