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Tool | October 2015

State-by-State Guide to Taxes on Retirees

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The Bottom Line
Map of Connecticut

Least Tax-Friendly

One of Kiplinger's top ten least tax-friendly states for retirees, the Constitution State is a tax nightmare for many retirees. Its real estate taxes are the second-highest in the nation, according to the Tax Foundation. The state does not tax military pensions, but it has no exemptions or tax credits for other types of pensions or other retirement income. And it taxes a portion of Social Security benefits for taxpayers above certain income thresholds.

State Sales Tax

6.35% for most items; 7.75% for luxury items, such as jewelry worth more than $5,000.

Income Tax Range

Low: 3% (on up to $20,000 of taxable income for married joint filers and up to $10,000 for those filing individually)

High: 6.99% (on the amount over $1 million for married joint filers and over $500,000 for those filing individually)

Social Security

Social Security is exempt for individual taxpayers with federal adjusted gross income of less than $50,000 and for married taxpayers filing jointly with federal AGI of less than $60,000.

Exemptions for Other Retirement Income

Railroad Retirement benefits are exempt. Military pensions are excluded from state income tax.


Taxable at ordinary income tax rates.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Taxable at ordinary income tax rates.

Private Pensions

Taxable at ordinary income tax rates.

Public Pensions

Military pensions are excluded from state income tax (the 100% exclusion effective starting in 2015 is up from 50% previously). All out-of-state government and federal civil-service pensions are fully taxed.

Property Taxes

Median property tax on Connecticut's median home value of $267,000 is $5,280, according to the Tax Foundation.

Tax breaks for seniors: Connecticut offers property tax credits to homeowners who are at least 65 years old and meet income restrictions. Income ceilings are $42,200 for married couples (with a maximum benefit of $1,250) and $34,600 for singles (with a maximum benefit of $1,000). Renters under those income ceilings may qualify for a rebate. Municipalities may provide additional tax relief for seniors.

Inheritance and
Estate Taxes

Connecticut imposes an estate tax on the transfer of estates valued at $2 million or more at a progressive rate starting at 7.2%. The rate rises to a maximum of 12% for an estate valued above $10.1 million. There is no inheritance tax.

Connecticut is the only state with a gift tax, which applies to real and tangible personal property in Connecticut and intangible personal property anywhere for permanent residents. Only the amount given after January 1, 2005, and over $2 million is taxed, starting at 7.2% of the excess and rising to $748,200 plus 12% of the excess over $10.1 million.


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