Bottom Line
Middle-Class Families: Least Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Least Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)
The Constitution State is a tax nightmare for many residents. Connecticut's median property tax rate is the third-highest in the U.S., so the $10,000 cap on the federal tax deduction for state and local taxes stings a bit more here.
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Income taxes are generally above average, too. But at least things are improving for seniors. The state is gradually eliminating taxes on pensions and annuities for retirees with income under a certain threshold, and the state will start phasing out its tax on distributions from traditional IRAs for many retirees starting in 2023.
Connecticut also imposes an estate tax and a gift tax (it's the only state with a gift tax).
One good thing is that sales taxes are on below average in Connecticut (partly because there are no local sales taxes).
The state is also sending "Child Tax Rebates" to many Connecticut families in 2022 (the application was due July 31, 2022). The rebates are worth up to $250 per child for a maximum of three children. The state began sending payments to qualified residents in August 2022.
Connecticut Income Taxes
Connecticut 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)
Connecticut Taxation of Social Security Benefits
Social Security income is fully exempt for single taxpayers with federal adjusted gross income of less than $75,000 and for married taxpayers filing jointly with federal AGI of less than $100,000. Taxpayers who exceed these thresholds can still deduct 75% of their federally taxable Social Security benefits on their Connecticut tax return.
Connecticut Tax Breaks for Other Retirement Income
Beginning in 2022, income from a pension or annuity is 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 (42% was exempt for the 2021 tax year).
Beginning in 2023, 25% of any distribution from a traditional IRA is 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. The exemption percentage is increased to 50% in 2024, 75% in 2025, and 100% in 2026 and thereafter.
To the extent it's included in federal AGI, 50% of income from the Connecticut teachers' retirement system is exempt. Teachers can claim this tax break or the general pension exemption, but not both.
Military pensions and Railroad Retirement benefits are fully exempt.
Connecticut Sales Tax
The state taxes most items at 6.35%, and localities are not allowed to add to that.
- Groceries: Exempt
- Clothing: Taxable (6.35% for items under $1,000; 7.75% for items over $1,000; items costing less than $50 are fully exempt)
- Motor Vehicles: Taxable (6.35% for vehicles under $50,000; 7.75% for vehicles over $50,000; 4.5% for non-resident military personnel on full-time active duty in the state)
- Prescription Drugs: Exempt
Connecticut Real Property Taxes
In Connecticut, the median property tax rate is $2,133 per $100,000 of assessed home value.
Connecticut Property Tax Breaks for Retirees
Connecticut offers property tax credits to homeowners who are at least 65 years old and meet income restrictions. For the 2022 tax relief program, income ceilings are $46,400 in 2021 for married couples (with a maximum benefit of $1,250) and $38,100 in 2021 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.
Connecticut Motor Fuel Taxes
Gasoline: 35.75¢ per gallon.
Diesel: 40.1¢ per gallon (49.2¢ per gallon effective July 1, 2022).
Connecticut Sin Taxes
Cigarettes and little cigars: $4.35 per pack
Snuff: $3 per ounce
Chewing and smoking tobacco: 50% of the wholesale price
Cigars: 50% of the wholesale price ($0.50 cap)
Vapor products: $0.40 per ml for closed systems, 10% of wholesale price for other vapor products.
Beer: $0.23 per gallon ($0.19 per gallon effective July 1, 2023)
Wine: $0.79 per gallon ($1.98 for sparkling wine)
Liquor: $5.95 per gallon
Marijuana: State retail tax at rate of $0.00625 per milligram of total THC for cannabis plant material, $0.0275 per milligram of total THC for cannabis edible products, and $0.009 per milligram of total THC for other cannabis products; municipal tax of 3%; general state sales tax
Connecticut Estate and Inheritance Taxes
Connecticut has an estate tax with a $9.1 million exemption for 2022 (the Connecticut exemption amount will equal the federal estate tax exemption amount beginning in 2023). The tax due is limited to $15 million.
Connecticut is the only state with a gift tax on assets you give away while you're alive. If you made taxable gifts during the year, state law requires that you file a Connecticut estate and gift tax return to identify such gifts. However, taxes are due in 2022 only when the aggregate value of gifts made since 2005 exceeds $9.1 million (the gift tax threshold will equal the federal estate tax exemption amount beginning in 2023).
Estate and gift tax rates for 2022 are either 11.6% or 12% (a flat 12% rate will be effective beginning in 2023).
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