When you live in Connecticut, you are expected to pay the state's taxes. By understanding the different tax liabilities and your responsibilities to the state, you are able to clarify the exact responsibilities you have based on your income level and the taxes in Connecticut that apply to your financial situation.
A key aspect of calculating your state tax in Connecticut is separating the state taxes from your federal taxes. The primary difference between state and federal taxes in Connecticut is the location where you send your taxes. Federal taxes are applied to federal services and the federal government. Your state taxes apply to state-run services and the state government. A state tax may also apply to your local area, such as a city or town tax, which is designed to address the needs of your local area.
The Connecticut taxes break down into different categories based on your income level, items you purchase, and homeownership. Excise taxes may also apply to specific items sold through the state, such as alcohol and cigarettes. In some cases, you pay the taxes one time each year. In other situations, you pay each time you buy an item. The exact process depends on the type of taxes that you are calculating.
State tax Connecticut differ based on your income level; however, you can expect the sales tax and the property tax to maintain the same percentage for each purchase. The state does have exemptions on property tax that apply to specific items or situations.
State income taxes in Connecticut are broken down into seven tax brackets. The Connecticut tax brackets depend on your income level or your family's household income when you are married and file joint taxes.
Connecticut's personal income taxes range from 3.0% to 6.99%. If you make less than $10,000 a year as a single person or less than $20,000 per year, then you are responsible to pay an income tax of 3.0%. Since the Connecticut state income tax has a marginal tax rate, you pay 3.0% on your income up to $10,000 or $20,000, depending on the way you file your taxes.
Anyone who makes between $10,000 and $49,999 per year as an individual, or $20,000 and $99,999 per year as a married couple, will have a marginal tax rate of 5.0% on every dollar after the initial $10,000 or $20,000 per year. As you move into a higher income level, you can expect to pay 5.5% on income that is between $50,000 and $99,999 for an individual or $100,000 and $199,999 for a married couple.
The next marginal tax bracket in the Connecticut income tax rate is 6.0% on income from $100,000 and $199,999 for an individual or $200,000 and $399,999 for a married couple. You will pay 6.5% on income from $200,000 to $249,999 for an individual or from $400,000 to $499,999 for a married couple. After you exceed $250,000 until $499,999 as an individual or $500,000 to $999,999 for a married couple, you will pay a marginal tax rate of 6.9%.
The final tax bracket applies to individuals who make an income of $500,000 or married couples who make an income of $1,000,000 per year. The final income tax bracket for residents of Connecticut is 6.99%.
Since the state uses a marginal tax rate, you can expect some variation in your taxes as you move up in income. The taxes only apply to the income that falls into the tax bracket, so the final outcome is slightly lower than the highest tax rate in the state.
Net capital gains taxes are 7% for Connecticut residents. Capital gains apply to investments you make that generate a profit. You may be subject to paying a capital gains tax on investment properties, dividend income, or the sale of investments.
Dividend and interest income is taxed separately from capital gains and ranges from 1% to 14%, depending on the Connecticut Gross Adjusted Income. The Connecticut tax rate does not require residents to file for capital gains taxes if the tax rate is less than ten dollars.
When it comes to how much is Connecticut state tax for capital gains on your investments, it depends on the amount you make with Adjusted Gross Income as well as the type of investments that apply to your taxes. Capital gains taxes for the sale of a property, equity investments, or other investments are a net 7%; however, income from dividends and interest has a higher potential tax rate due to the classification of your investment income. Keep in mind that capital gains taxes apply to the amount you make above the initial investment. You are not taxed on your initial investment.
The standard sales tax rate in Connecticut is 6.35% and it applies to every item you purchase in the state. You can expect to pay sales taxes on products you buy at the store, a motor vehicle, and other purchases.
The state does not charge sales taxes on groceries, prescription medications, non-prescription drugs, or clothing items that cost less than $50. You can expect to pay a sales tax on clothing items that exceed $50 in the state. The state also offers a tax exemption for Internet service, fluorescent light bulbs, textbooks, and magazine or newspaper subscriptions. The state also has a sales tax exemption on diapers.
The basic sales tax in Connecticut is 6.35%, however, the state does have a special rate for motor vehicles that is 4.5%. You also have a 1% tax on data processing services. Although the state has a sales tax on most goods, it does not change based on your local area. The state does not allow local governments to add local sales taxes on goods or services. The 6.35% tax applies across to the state to products or services that are not identified as an exception.
Excise taxes are additional costs that apply to specific goods in the state. Items like alcohol or cigarettes may have an excise tax that applies to the item. Connecticut does apply excise taxes to gasoline, cigarettes, and alcohol.
Insurance taxes apply based on premiums for an insurance policy. Each state sets different state taxes on insurance companies based on the size of the premiums.
In Connecticut, insurance providers are required to pay a tax on premiums that exceed $209,026 for policies focused on life or annuity coverage, health insurance coverage, and property coverage. The cost of insurance taxes depends on the specific amount set in the premium.
The state may also collect taxes or fees related to licensing and related costs. The licensing costs or related fees depend on the type of license required for the insurance coverage or the situation. Insurance taxes are paid by the insurance provider, so the costs associated with the taxes may not be obvious to consumers using the coverage.
Property taxes in Connecticut can seem challenging to calculate. You will want to use a Connecticut tax calculator to assess the exact costs associated with a property when you plan to buy a house or are working on your state taxes.
The median property tax rate in Connecticut is roughly 1.63% of the property's value. The state uses mill rates to calculate exact taxes based on municipalities for each property.
Although the median tax rate for the state is 1.63%, you should be aware that different locations in the state may set a different mill rate for the municipality. That means you can see higher or lower rates when compared to the average or median property tax rate.
A tax calculator can help when you are unsure about the mill rate or the process of clarifying your tax rate. Focus on your local area to get an accurate estimate of your taxes.
Estate and inheritance taxes in Connecticut apply to residents of the state who own property and plan to pass it down to their children or other individuals. An inheritance tax may also apply if the person is passing down stocks, bonds, or other assets outside of the property.
Connecticut’s estate tax applies to any property that exceeds $2 million. The tax rate is progressive based on the value of the property and starts at 7.2% for every $100,000 over the initial threshold for a property. It increases up to 12% if a property is worth $10.1 million or more.
The exact tax rate depends on the value of the property; however, the law is designed to limit the cost of estate taxes on families that do not have a property with a value of $2 million or higher.
The state does have exemptions for small estate taxes and inheritance taxes. The taxes apply after the amount exceeds the exemption set up by the state. In the case of monetary inheritance, the exemption applies to an inheritance of $6,000 or less. If the amount exceeds $6,000, then it is subject to an inheritance tax. The exact tax rate depends on the size of the inheritance.
Taxes may apply to gifts or property transfers that occur before death with the expectation that the person will die if it occurs three years before the death. The only exception is when it can be proven that the transfer occurred without the expectation of death. For example, a gift that is given before a loved one dies may not be counted as an inheritance if the person had a reasonable expectation that he or she would live for several years.
Inheritance taxes apply to certain types of accounts in Connecticut. It should be noted that the state does not collect taxes on life insurance benefits, worker's compensation insurance, or related insurance policies. It does apply to an annuity and may apply to certain pension plans and trusts. A taxable portion of a pension plan may also apply to certain types of plans.
Although an estate or inheritance tax applies to property and assets in Connecticut, it does not apply to any debt or related costs associated with the estate. It only applies to the inherited amount after subtracting the debts, unpaid taxes, or other claims on the estate. The remaining amount may be taxed if it exceeds the amount set aside for exemptions.
A critical part of filing your Connecticut state tax is clarifying the tax credits that apply to your income and situation.
The state offers a Personal Tax Credit to Connecticut residents who earn less than $64,500 as a single individual or $100,500 when married and filing jointly. The Personal Tax Credit ranges from 1 % to 75 %, depending on income level and it phases out as your adjusted gross income, or AGI, increases to exceed the limitations.
The state also offers a tax credit to residents who have worked or lived part of the year in different states. Any income taxes paid to a different state and income earned in a different state are given an exemption for Connecticut state taxes. The Property Tax Credit applies to property owners who are 65 years old or older, as well as property owners who claim at least one dependent on their tax forms. The maximum tax credit is $200 per year; however, it phases out as the value of the property increases, so the exact rate may vary based on the property.
Residents of Connecticut who qualify for the federal Earned Income Credit may also qualify for the state Earned Income Credit. The state credit requires residents to claim the federal credit and allows up to 23% of the federal credit that applies to their taxes. The exact amount depends on income level and the size of your household, but you can expect to get back a percentage of the amount you got for your federal credit.
Connecticut offers an Angel Investor Credit for investors who give $25,000 or more to qualifying small businesses in the state. The investment must be approved by Connecticut Innovations. The tax credit applies to investments of $25,000 to $250,000 in a business. It is 25% of the cash investment in the business and the investor must reserve a credit.
How much is Connecticut tax exemptions? That depends on the cost of the item. In Connecticut, there are sales tax exemptions on specific items that you may buy for your family. The common exemptions include:
- Bike helmets
- Car seats and booster seats for children
- Textbooks for college
- Gun safety devices, like safes and trigger locks
- State and federal flags
- Food products
- Magazine and newspaper subscriptions
- Seeds for food items
- Medical equipment
- Medical goods
- Wigs designed for individuals with qualifying medical conditions like cancer
- Prescriptions, including glasses and eyewear
- Non-prescription medications
- Hearing aids
- Diabetic supplies
- Rare coins
- Shoe repair services
- Safety apparel or equipment used in a workplace
- Personal property or plots of land for burial or cremation up to $2,500
The state has several items or services that are exempt from state sales taxes. The exemptions primarily focus on safety and medical necessity, as well as helping families with children. The taxes for motor vehicles also differ from the state sales tax.
Many states also offer tax deductions in addition to tax exemptions, but Connecticut typically employs tax credits instead of tax deductions. Tax credits and deductions are similar in that they both reduce the taxpayer’s tax bill, but tax credits are subtracted from their tax bill dollar for dollar, whereas deductions reduce taxable income.
Connecticut offers a personal exemption instead of a state standard deduction.
These personal exemptions are phased out as income levels surpass the exemption standards.
After you have your tax paperwork prepared and ready, you want to clarify how you can pay your taxes. Connecticut offers several options for tax payments if you are not getting a refund.
The first option is to pay by mail. You want to write a check or money order to the Commissioner of Revenue Services. Send your tax paperwork and the money order or check to the Department of Revenue Services. The address is PO Box 2977 in Hartford, Connecticut. Make sure you write the tax year on your check or money order, as well as your Social Security Number to ensure proper payment.
If you prefer to pay your taxes by electronic payment, then you can pay the taxes when you file your paperwork electronically. Paying through the state Taxpayer Service Center allows you to authorize a direct transfer from your bank account. You can also schedule the payment for a different date to ensure that it goes through on time.
You can also pay electronically through the Taxpayer Service Center if you send your tax paperwork through the mail. Select the Make A Bill Payment and then authorize a fund transfer from your bank account.
Now that you know what to expect when filing your Connecticut state taxes, you’re almost ready to say farewell to yet another tax season! But before you do, head over to our federal income tax calculator to ensure you’re ready to fulfill your federal tax obligations in addition to Connecticut state taxes.
The information contained herein is accurate as of 2019. The information is subject to change as tax laws in the state of Connecticut change. Special circumstances may impact your tax returns in some situations.
Sources: Insurance Information Institute State Taxes, Kiplinger 10 Least Tax-Friendly States for Retirees, 2018, MSN Obscure and odd taxes in every US state, Office of Legislative Research Personal Income Tax Credits, Retirement Living Taxes in Alabama to Iowa State of Connecticut Capital Gains, Dividends & Interest Income Tax For Full-Year And Part-Year Residents, Mill Rates, Connecticut's Inheritance Tax, Tax Incentives, What is the EITC?, Exemptions from Sales and Use Taxes, The Connecticut Income Tax: Supplemental Information for Senior Citizens, Department of Revenue Services, Income Tax Payment Options, Tax Foundation Taxes in Connecticut, State and Local Individual Income Tax Collections Per Capita, TaxRates.org Connecticut State Income Tax, Connecticut Property Taxes 2019, The 2019 Connecticut State Sales Tax, Excise Tax Rates by State, USA Today How much gas tax adds to cost of filling up your car in every state.