Connecticut does not provide many tax advantages to retrees. Most retirement income, including pensions and annuities is subject to the state's individual income tax.
Social Security and Pensions Are Taxed in Connecticut
Unlike most states, Connecticut taxes Social Security benefits. Social Security is considered taxable income in Connecticut for single filers whose income exceeds $50,000 a year and married couples whose income exceeds $60,000 a year. Social Security benefits must be listed on a state tax return in Connecticut.
Connecticut residents will have to declare most pension and annuity payments on their state tax returns as well. Connecticut does not tax retirement income for nonresidents that reside in the state part time.
Almost all pensions and annuity payments are subject to Connecticut's income tax. Even former state employees have to declare pension income on their state tax return. Connecticut even taxes pensions from companies in other states.
Connecticut Income Tax
Connecticut residents have to add all their income to the adjusted gross income listed on their federal tax returns because the state taxes almost all forms of income. This includes military retirement pay, military pensions, federal pensions, income from US treasury bonds, and state and local tax refunds.
The standard income tax rate in Connecticut is 3% on the first $10,000 of taxable income for singles and 3% on the first $20,000 for married couples filing jointly. The rate goes up to 5% for taxable income amounts between $10,000 and $500,000 for single filers and $20,000 and $1 million for couples filing jointly. There is also a $12,000 individual income tax exemption for single filers and a $24,000 exemption for couples filing jointly.
Persons who live in Connecticut for part of the year will have to file a Special Tax Return. Any income earned while living in Connecticut is subject to state taxes. This would include retired persons who spend part of the year in other states.
Connecticut Sales Tax
Only the state government imposes a sales tax in Connecticut, there are no local or city sales taxes. This gives the state a lower sales tax rate than most states.
The current state sales tax rate is 6.35%. Unprepared foods purchased at grocery stores are exempt from the tax but most retail sales are not excluded. In many states prescription drugs are typically exempt from sales tax, but sales tax is collected on prescription drugs in Connecticut.
Services including most repair services are subject to sales tax in Connecticut. Even health club memberships are taxed.
Property Taxes in Connecticut
Property taxes in Connecticut are administered by City and Town Governments. Property owners will have to contact their municipal government to see what their property tax rates are.
The state of Connecticut offers a Property Tax Credit which can reduce the state income tax bill. The property tax credit applies to vehicles and to a person's primary residence if they own it. Only fulltime residents of Connecticut are eligible for this credit.
|Cost of Living Rank:||#47|
|Income Tax:||3.0% - 6.5%|