Connecticut Tax Guide 2026

Income tax — 7 brackets, MFJ doubling preserved

2026 single brackets (Conn. Gen. Stat. §12-700, est.): • 2.0% — first $10,000 • 4.5% — to $50,000 • 5.5% — to $100,000 • 6.0% — to $200,000 • 6.5% — to $250,000 • 6.9% — to $500,000 • 6.99% — over $500,000 MFJ thresholds approximately double. The 2.0%–4.5% brackets were reduced in 2024 reforms (PA 23-204) — first such cut in years. CT does NOT have a standard deduction. Instead, personal exemption ($24,000 MFJ / $15,000 single / $19,000 HoH) phases out for higher-income filers. The exemption phases entirely to zero around $100k single / $130k MFJ — meaning high earners receive NO offset for personal exemption. CT taxes capital gains at ordinary income rates. No QBI §199A conformity (federal QBI deduction added back).

Convenience-of-employer doctrine — reciprocal with NY

Connecticut adopted a RECIPROCAL convenience-of-employer rule in 2019 (Conn. Gen. Stat. §12-711(b)(2)(C), enacted by PA 19-186): when a state taxes Connecticut residents under that state's own convenience-of-employer doctrine (i.e., New York, Nebraska, Delaware, Pennsylvania), Connecticut applies its OWN convenience-of-employer rule reciprocally. In practice this primarily matters for New York: a CT resident working remotely for a NYC employer faces both: • NY convenience-of-employer (20 NYCRR §132.18): NY taxes the remote days as NY-source • CT convenience-of-employer (reciprocal): CT also potentially sources the same days as CT-resident income with NY tax credit The result is usually wash-credit (CT gives a credit for NY tax paid on the same income), but timing, sourcing, and audit complexity is materially higher than for residents of states without the reciprocal rule. For CT-resident remote workers of MA, NJ, or other non-convenience states: standard CT-resident treatment, with credit for any tax paid in the work-source state.

PTET — mandatory regime (modified 2024)

Connecticut's PTET (Conn. Gen. Stat. §12-699, enacted by PA 18-49) was uniquely MANDATORY for most pass-through entities at its 2018 enactment — Connecticut was first in the nation with a PTET, and made it mandatory to ensure compliance. Mandatory rate: progressive 6.99%-matched (effectively the top individual rate on PTE taxable income). Owners get a credit for the entity-level tax paid. 2024 reforms (PA 24-151, effective 2024 tax year): PTET became ELECTIVE for tax years 2024 forward, conforming Connecticut to other states' optional PTET regimes. Tax years 2018–2023 remained under the mandatory regime. Election: made on Form CT-1065/CT-1120SI; annual; due by the original return date. Federal SALT benefit: 37% × full state PTET paid. For a Greenwich-based hedge fund partner with $2M K-1 income: PTET ~$140,000 × 37% federal = ~$51,800 federal savings annually.

Estate AND gift tax — the only state gift tax

Connecticut estate tax (Conn. Gen. Stat. §12-391): exemption $13,990,000 for 2026 (matches federal); top rate 12%. The CT exemption rose in lockstep with the federal exemption increases under TCJA and was further raised by PA 23-204 to permanently track the federal exemption (currently $13.99M/$15M permanent under OBBBA). Connecticut is the ONLY US state with a stand-alone state gift tax (Conn. Gen. Stat. §12-640 et seq.): same $13.99M exemption, applied on a unified basis with the estate tax. Lifetime gifts above $13.99M trigger CT gift tax at up to 12%. Form CT-706/709 reports both gift and estate. For most CT residents: federal estate planning (annual $19k exclusion, lifetime $15M federal/$13.99M CT exclusion in 2026) handles the situation. Ultra-high-net-worth families with $20M+ estates need joint federal+CT-specific planning given CT's stand-alone gift tax — large lifetime gifts that escape federal tax may trigger CT gift tax.

Sales tax

Statewide 6.35% — NO local sales tax. Conn. Gen. Stat. §12-408. Special rates: • Prepared meals and beverages: 7.35% (1% surcharge added 2019) • Luxury items (vehicles >$50k, boats >$100k, jewelry >$5k, clothing >$1,000, fur >$25k): 7.75% • Computer and data processing services: 1% Exemptions: groceries, prescription drugs, most professional services (legal, accounting, consulting — except processing services). Connecticut has historically not exempted clothing — taxable at standard rate unless single item is over $1,000 (then luxury 7.75% applies). Economic nexus (Conn. Gen. Stat. §12-407(a)(15)(A)(ii), post-Wayfair): $100,000 AND 200 transactions (Connecticut uses AND).

Property tax — among the highest US burdens

Statewide average effective ~2.14% — among the very highest in the US, comparable to NJ and IL. Fairfield County (Greenwich, Stamford, Westport) ~1.4%, New Haven (New Haven city ~2.7%; suburbs ~1.8%–2.2%), Hartford (Hartford city ~3.5%, West Hartford ~2.4%), Litchfield ~1.7%, Bridgeport (Fairfield County, but city) ~2.97% — among the highest city mill rates in the US. Property taxes fund the bulk of municipal and school spending (no county-level government in CT — only municipalities of varying sizes from 100k+ to under 5,000 residents). Mill rates set per $1,000 of assessed value; assessment is 70% of fair market value (Conn. Gen. Stat. §12-62a). Annual revaluations not required; statutorily must revalue every 5 years. Elderly Homeowners' Tax Relief (Conn. Gen. Stat. §12-129b-129d): partial relief for 65+ with income under ~$53k (single)/$65k (joint). Disabled veterans get additional exemptions.

Self-employed considerations

LLC formation: $120 (Connecticut Secretary of the State). Annual Report: $80 (above average). Connecticut Paid Family and Medical Leave (CT FMLI, Conn. Gen. Stat. §31-49g): 0.5% employee-only contribution (no employer match) on wages up to the Social Security wage base ($184,500 in 2026). Benefits up to 12 weeks. Unemployment: 0.5%–8.4% on first $26,100 wage base 2026. For Greenwich/Stamford finance professionals working remotely or partly remotely for NYC employers, the combined burden is among the most complex in the US: NY convenience-of-employer + CT reciprocal + high CT income tax + 2%+ property tax. CT's PTET helps (per partner: meaningful federal SALT savings) but doesn't simplify the multi-state filing. For Hartford/Bridgeport service-sector self-employed at $100k–$200k, CT is a moderately high-tax state: 5.5%–6.0% marginal + 2%+ property tax + no QBI conformity = ~25%–30% total state+local effective burden for typical small-business owners.

Worked example: Sebastian Reilly, Stamford-based hedge fund analyst (single, NYC employer, 2026)

Sebastian earned $480,000 W-2 from a NYC-headquartered hedge fund in 2026. He works 3 days/week in NYC office, 2 days/week from his Stamford home. He has $120,000 of LTCG from prior firm RSUs vesting and selling.

Federal: ordinary federal on wages + LTCG at 20% bracket + NIIT. New York (employer location): Under NY convenience-of-employer (20 NYCRR §132.18), all wages sourced to NY UNLESS the 2 remote days are employer-required (not Sebastian's convenience). Assuming employer-convenience treatment: all $480k sourced to NY. NY non-resident tax: ~$31,000 (using 2026 NY non-resident schedule on $480k, no NYC tax since non-resident). LTCG sourced based on residency, not work location → NOT NY-source for non-resident. Connecticut (Sebastian's residence): Resident on full $480k + $120k = $600k. CT brackets: ~$36,000 CT state tax pre-credit. Credit for NY tax paid: $31,000 (capped at the CT tax on the doubled-taxed income). Net CT after NY credit: $36,000 − $31,000 = $5,000. Plus CT tax on $120k LTCG (CT-source by residency): part of the $36k computation. Reciprocal CT convenience-of-employer (Conn. Gen. Stat. §12-711(b)(2)(C)): Doesn't add new CT tax in this case — the reciprocal rule prevents Sebastian from claiming the 2 Stamford-remote days as 'non-NY' for purposes of clawing back NY tax credit. Property tax on Sebastian's $1.1M Stamford condo at ~1.5% effective: ~$16,500/yr. CT PTET: Sebastian is W-2, not a partner — no PTET available to him personally. CT FMLI on his wages: 0.5% × $184,500 (SS cap) = $923 annual. Total CT+NY tax: ~$36,000 + ~$1,800 LTCG NIIT (federal layer) — most of CT's tax is offset by NY credit, but full NY-tax-without-credit weight remains on the wage income.

Statute references

• Personal income tax brackets — Conn. Gen. Stat. §12-700
• Reciprocal convenience-of-employer doctrine — Conn. Gen. Stat. §12-711(b)(2)(C)
• Pass-Through Entity Tax (PTET — mandatory→elective) — Conn. Gen. Stat. §12-699
• PTET reform (mandatory→elective) — Public Act 24-151
• Estate tax — Conn. Gen. Stat. §12-391 et seq.
• Gift tax (Connecticut — only state with one) — Conn. Gen. Stat. §12-640 et seq.
• Sales tax — uniform statewide — Conn. Gen. Stat. §12-408
• Sales tax economic nexus — Conn. Gen. Stat. §12-407(a)(15)(A)(ii)
• Paid Family and Medical Leave — Conn. Gen. Stat. §31-49g

Related pages

• Multi-State Tax Guide →
• PTET Analyzer →
• Estate Tax Calculator →
• State Tax Comparison →