Connecticut · the return

How Connecticut income tax works: federal AGI, a vanishing exemption, seven brackets

A walk down Form CT-1040 from the first line to the last: why it starts from federal adjusted gross income, the short list of additions, the subtractions that matter, the personal exemption that shrinks to nothing by $44,000, the seven rates from 2% to 6.99%, the three adjustments that quietly take the low brackets back, the credits, and how the tax gets paid in. For anyone who files here.

By Charles Trautman, EA, editor

Need to Know Tax · written from Connecticut Department of Revenue Services (DRS) sources, November 3, 2026; updated November 12, 2026 after the election · not yet reviewed by a Connecticut practitioner

Connecticut’s return looks like a graduated income tax and behaves like something else. Form CT-1040 starts from federal adjusted gross income, line 11 of the federal return, so the standard deduction, itemized deductions and every other deduction taken below that line never reach it. In their place is a personal exemption of $15,000 single or $24,000 joint that disappears, dollar for dollar, once Connecticut adjusted gross income passes $30,000 or $48,000. Seven brackets run from 2% to 6.99%, but a phase-out add-back and a “tax recapture” take the lower brackets back as income rises, and a personal tax credit of up to 75% of the tax hands part of it back at the bottom. None of the figures is indexed, and none changed for 2026. The result is a tax that is light below about $50,000, close to a flat 5% or 6% through the middle, and a flat 6.99% at the very top.

Who files

A full-year resident reports all income, wherever earned, and takes a credit on Schedule 2 for income tax paid to another state on income Connecticut also taxes. A part-year resident or nonresident files Form CT-1040NR/PY instead, with Schedule CT-SI showing the Connecticut-source share; that return is covered in Moving to Connecticut. Married couples generally use the federal filing status. A return is required when gross income, before any Connecticut subtraction, reaches $15,000 single, $12,000 married filing separately, $19,000 head of household or $24,000 joint, which means a retiree whose pension is fully exempt may still have to file. Below those lines it is still worth filing to recover withholding or claim the refundable earned income credit.

Where it starts: federal AGI

Line 1 of Form CT-1040 is federal adjusted gross income. Everything the federal return does after that line is invisible here: the $32,200 joint standard deduction, the extra deduction for age, the $6,000 senior deduction in effect for 2025 through 2028, the deductions for tips, overtime and car-loan interest, the 20% qualified business income deduction, and every itemized deduction. None of them needs an add-back, because none was ever taken out. Connecticut gives no deduction for mortgage interest, charitable gifts, medical bills or property tax, whether or not the taxpayer itemized federally, so the federal SALT cap changes nothing on the state return.

The flip side is that the federal adjustments on Schedule 1 of the 1040, IRA and HSA contributions, half of self-employment tax, student loan interest and the rest, all flow through, because they reduce AGI before Connecticut picks it up. A tipped worker who owes no federal tax on $8,000 of tips still owes Connecticut on them; a $7,000 IRA contribution cuts both taxes.

The additions

Schedule 1 of the CT-1040 adds a short list of items to federal AGI. Most households have none.

Other states’ municipal bond interest. Federally tax-exempt interest on bonds issued by other states and their towns is added back. Interest on Connecticut bonds is not. A brokerage 1099 that lumps all municipal interest together has to be split.

Bonus depreciation and Section 179. Connecticut has not followed federal bonus depreciation for individuals since 2017. A sole proprietor, landlord, farmer or pass-through owner who took bonus depreciation federally adds all of it back, then deducts 25% a year over the next four years. Eighty percent of a federal Section 179 deduction is added back the same way and recovered over four years. The 2025 federal law’s return to 100% bonus depreciation makes this add-back larger and more common on 2026 returns.

The subtractions

This is where the return gives money back, and the biggest lines belong to retirees.

The main Schedule 1 subtractions, 2026
Subtraction	Limit
Social Security benefits taxed federally	All of it if federal AGI is under $75,000 single / $100,000 joint and head of household; above that, enough so that no more than 25% of total benefits is taxed
Pensions, annuities, 401(k), 403(b), 457 plan income	100% if federal AGI is under $75,000 single / $100,000 joint, phasing down in steps to zero at $100,000 / $150,000
Traditional IRA distributions, including Roth conversions	100% for 2026 (up from 75% in 2025), same federal-AGI phase-out as pensions
Military retirement pay and survivor benefits	All of it, at any income
Connecticut Teachers’ Retirement System pension	50% at any income, or the general pension subtraction if better, not both
Interest on U.S. government obligations	All of it
Contributions to CHET, the Connecticut 529 plan	$5,000 single / $10,000 joint a year; excess carries forward five years
Depreciation recovered from an earlier bonus or Section 179 add-back	25% of the add-back a year, four years
Honor-guard pay at veterans’ funerals (new 2026); U.S. Public Health Service Commissioned Corps retirement pay (new 2026)	All of it

The retirement subtractions test federal AGI, not age, and the Social Security line is a cliff rather than a slope. Both are worked through in Connecticut for retirees.

Federal AGI plus additions minus subtractions is Connecticut adjusted gross income, Line 5. The exemption, the add-back, the recapture, the personal credit and the property tax credit are all measured against it.

The personal exemption

Connecticut has no standard deduction. In its place is a personal exemption subtracted from Connecticut AGI: $15,000 single, $12,000 married filing separately, $19,000 head of household, $24,000 joint. There is no extra exemption for age, blindness or dependents.

The exemption shrinks by $1,000 for every $1,000, or part of $1,000, that Connecticut AGI exceeds $30,000 single, $24,000 married filing separately, $38,000 head of household or $48,000 joint. It is gone at $44,000, $35,000, $56,000 and $71,000. Inside that band every extra dollar of income is taxed twice over: once as income, once again because it removes a dollar of exemption. Above those lines Connecticut is, in effect, a tax on gross income with no deduction at all.

The rates

Connecticut AGI minus the exemption is Connecticut taxable income, and the brackets apply to that.

Connecticut tax brackets, 2026 (not indexed; unchanged from 2024)
Rate	Single and married filing separately	Head of household	Married filing jointly
2%	first $10,000	first $16,000	first $20,000
4.5%	$10,000 to $50,000	$16,000 to $80,000	$20,000 to $100,000
5.5%	$50,000 to $100,000	$80,000 to $160,000	$100,000 to $200,000
6%	$100,000 to $200,000	$160,000 to $320,000	$200,000 to $400,000
6.5%	$200,000 to $250,000	$320,000 to $400,000	$400,000 to $500,000
6.9%	$250,000 to $500,000	$400,000 to $800,000	$500,000 to $1,000,000
6.99%	over $500,000	over $800,000	over $1,000,000

The 2% and 4.5% rates date from the 2024 cut; before that the bottom two were 3% and 5%. Capital gains, dividends, interest, unemployment and lottery winnings are taxed at the same rates as wages. There is no preferential rate for gains and no deduction for gambling losses.

Then come three adjustments.

The phase-out add-back. The 2% bracket saves a single filer $250 compared with paying 4.5% on the first $10,000 ($500 joint, $400 head of household). Above Connecticut AGI of $56,500 single, $100,500 joint or $78,500 head of household, that saving is taken back in steps, $25 for each $5,000 or part of it for a single filer, until the full $250 is gone at $101,500 ($500 at $145,500 joint; $400 at $114,500 head of household).

The tax recapture. Above Connecticut AGI of $105,000 single, $210,000 joint or $168,000 head of household, a second table takes back the benefit of the 4.5%, 5.5%, 6%, 6.5% and 6.9% brackets, rising in steps to a maximum of $3,400 single, $6,800 joint and $5,320 head of household at $540,000, $1,080,000 and $864,000. At that point every dollar of taxable income has, in effect, been taxed at 6.99%.

The personal tax credit. Running the other way, filers with Connecticut AGI below $64,500 single, $100,500 joint or $78,500 head of household subtract a percentage of their tax: 75% at the lowest incomes (up to $18,800 single, $30,000 joint, $24,000 head of household), stepping down quickly to 10% through most of the range and then to 1% before it ends. For a single filer between $33,300 and $60,000 the credit is a flat 10% of the tax. This credit is what stands in for a dependent exemption.

Worked example: a single filer earning $48,000

Wages of $48,000, no other income, $3,000 of 401(k) contributions already out of the W-2. Rents an apartment; pays the town $600 in motor vehicle tax on the car. Connecticut withholding of $1,700 under CT-W4 code F.

Federal AGI (CT-1040 Line 1)	$48,000
Additions and subtractions	$0
Connecticut AGI (Line 5)	$48,000
Personal exemption: $15,000 less $18,000 of excess over $30,000	−$0
Connecticut taxable income	$48,000
Tax: 2% of $10,000 plus 4.5% of $38,000	$1,910
Phase-out add-back (begins at $56,500)	$0
Personal tax credit: 10% of $1,910	−$191
Property tax credit (car tax $600, capped at $300; full credit below $49,500)	−$300
Connecticut income tax	$1,419
Withholding	−$1,700
Refund	$281

The exemption was worth $15,000 at $30,000 of income and nothing at $48,000. Had this filer earned $42,000 instead, the exemption would be $3,000, taxable income $39,000, and the tax before credits $1,505: $6,000 less income, $405 less tax, a 6.75% marginal rate inside a 4.5% bracket.

Worked example: a two-earner couple at $136,000

Wages of $95,000 and $40,000, interest of $1,000, and $4,000 put into a CHET account for a grandchild. Property tax of $7,200 on the house. Both spouses filed CT-W4 code C, so each employer withheld as if that paycheck were the household’s only income; total withholding $5,300.

Federal AGI	$136,000
CHET contribution subtraction	−$4,000
Connecticut AGI	$132,000
Personal exemption (gone at $71,000 joint)	−$0
Tax: 2% of $20,000, 4.5% of $80,000, 5.5% of $32,000	$5,760
Phase-out add-back: seven $5,000 steps above $100,500 at $50	$350
Tax recapture (begins at $210,000 joint)	$0
Personal tax credit (ends at $100,500 joint)	−$0
Property tax credit: $300 less 15% for each $10,000 over $70,500, seven steps	−$0
Connecticut income tax	$6,110
Withholding	−$5,300
Balance due	$810

Two code-C certificates gave the household two $24,000 exemptions and two trips through the 2% and 4.5% brackets at the payroll stage; the return allows one of each. The fix is on the CT-W4 itself: the higher earner picks code A or D and the lower earner code D, or one of them adds a flat amount on Line 2 (verify). The $7,200 property tax bill earned nothing, because the credit is gone above about $140,500 of joint Connecticut AGI.

The credits

After the tax and its adjustments, the return allows a short list of credits. Only the earned income credit and a handful of new business credits are refundable.

Connecticut credits on the 2026 return
Credit	Amount	Limit
Credit for income tax paid to other states (Schedule 2, Line 7)	The lesser of the other state’s tax or the Connecticut tax on the same income	Nonrefundable; the income must be taxed by both
Property tax credit (Schedule 3, Line 11)	Up to $300 of property tax paid to a Connecticut town on the primary residence or a motor vehicle, or both	Nonrefundable; full below Connecticut AGI of $49,500 single / $70,500 joint, cut $45 for each $10,000 above, gone at roughly $119,500 / $140,500 (verify)
Connecticut earned income tax credit (Schedule CT-EITC)	40% of the federal EITC, plus $250 if there is a qualifying child	Refundable; full-year residents with a federal claim and Social Security numbers for everyone
Pass-through entity tax credit (Schedule CT-PE)	The owner’s share of the elective tax the entity paid, at 87.5%	Nonrefundable
Family child care home owner credit (new 2026)	$500 per licensed home	Refundable
Farm investment credit (new 2026)	20% of farm investment property	Refundable

There is no child tax credit, no dependent care credit, no renter credit and no credit for 529 contributions on the Connecticut return; the CHET break is a subtraction. The family caregiver credit enacted in 2026 starts with the 2027 tax year. Families are covered in Credits and breaks for Connecticut families.

The property tax credit is the one most people touch. The motor vehicle tax bill from the town counts, so renters with a car qualify as well as homeowners, and since 2022 there is no age or dependent test. Schedule 3 asks for the town, the property, the dates paid and the amount.

Withholding and estimated payments

Connecticut withholding runs on codes, not allowances. Form CT-W4 asks the employee to pick a letter, A through F, by filing status and expected household income, and the employer uses that code’s exemption, bracket, add-back, recapture and personal-credit tables, the same tables the return uses. For one job it comes out close. For two earners, or anyone with pension or investment income on the side, it does not, because each payer withholds as though its payment were the whole picture. An employee who files no CT-W4 is withheld at 6.99% with no exemption.

Pensions and IRA payers withhold Connecticut tax only when the payee asks on Form CT-W4P; the 2024 rule requiring withholding on lump-sum distributions is suspended through the end of 2026 by the law the Department describes on its 2026 withholding page, and a 2026 act extends the suspension through 2027 (verify). Anyone who expects to owe $1,000 or more after withholding and credits must make estimated payments on Form CT-1040ES, due April 15, June 15 and September 15, 2026 and January 15, 2027. The safe harbor is 90% of this year’s tax or 100% of last year’s, paid in four equal, timely installments; Connecticut has no 110% rule for higher incomes. Interest on a shortfall is 1% a month per installment, figured on Form CT-2210.

How to file

The return is due April 15, 2027. Most returns are e-filed with the federal return; the Department’s own system, myconneCT, files Form CT-1040 and CT-1040NR/PY free and takes payment by bank debit, with the federal return filed separately. Form CT-1040 EXT by April 15 extends the filing date to October 15, 2027, but not the payment date; a filer with a federal extension who expects no Connecticut tax due does not need it. Amend with Form CT-1040X. Dates, forms and penalties are in Connecticut calendar and forms.

What trips people up

Expecting the federal senior, tips or overtime deduction to lower Connecticut tax. It never reaches the return.
Two earners both on CT-W4 code C, and a balance due every April.
Pension or IRA income subtracted in full when federal AGI is over the line, or not subtracted at all when it is under.
A Roth conversion or one-time gain that lifts federal AGI past $75,000 or $100,000 and costs the whole year’s retirement subtraction.
The property tax credit left off because the filer rents; the car tax counts.
Bonus depreciation from a Schedule C, E or F carried into Connecticut without the add-back.
The extension treated as an extension to pay.

Behind the scenes: why the brackets are taken back

Connecticut adopted its income tax in 1991 as a flat 4.5% on federal AGI with a personal exemption and a personal credit, a design meant to be short and to spare lower incomes. The brackets came later, and each time the legislature added a lower rate for the bottom of the scale it also added a table to take that benefit away from higher earners, rather than redraw the whole schedule. That is where the phase-out add-back and the recapture come from: they are the price of a 2% bracket that the state did not want to extend to everyone. The 2024 cut of the bottom rates kept both devices and reset their figures. The result is a tax with graduated rates for the middle and, above about $540,000 single, a flat 6.99% on everything. Because none of the thresholds is indexed, inflation moves more households into the add-back and the exemption phase-out every year without a vote.

What to bring

Every W-2, 1099-R, SSA-1099 and 1099-INT/DIV, with the state breakdown of any municipal bond interest
Property tax bills paid during 2026 to a Connecticut town on your home and your cars, with dates paid
CHET account contributions by anyone in the household, and any Form 1099-Q for withdrawals
For pension, 401(k) or IRA income: the 1099-Rs, and a note of any Roth conversion
Depreciation schedules from any Schedule C, E or F, or a K-1 that passed bonus depreciation through to you
Connecticut estimated payments made, with dates, and any amount paid with CT-1040 EXT
Both spouses’ CT-W4 codes, so the withholding can be fixed for next year
If you moved or worked in another state: the dates, and income by period and by state
Any letter from the Department of Revenue Services

Questions people ask

Does Connecticut have a standard deduction?

No. The personal exemption of $15,000 single or $24,000 joint is the only general deduction, and it shrinks to nothing between $30,000 and $44,000 single, $48,000 and $71,000 joint. Above those lines the whole of Connecticut AGI is taxed.

I don’t owe federal tax on my tips anymore. Why do I owe Connecticut?

Because the federal tips deduction comes off after adjusted gross income and Form CT-1040 starts from AGI. The tips are in Line 1 and nothing takes them out. The same goes for the overtime deduction, the senior deduction and car-loan interest. A bill to exempt tips and overtime at the state level was filed in 2026 and did not pass.

Why is my Connecticut tax more than the bracket table says?

Look for the phase-out add-back and the recapture on the Tax Calculation Schedule. Above $56,500 of Connecticut AGI single ($100,500 joint) the add-back takes back the 2% bracket, up to $250 ($500); above $105,000 ($210,000) the recapture takes back the rest of the lower brackets, up to $3,400 ($6,800). Both are part of the tax, not penalties.

Do I get anything for my children?

Not on the Connecticut return unless you qualify for the earned income credit, which pays 40% of the federal credit plus $250 if you have a qualifying child. There is no dependent exemption and no child tax credit. Head of household status is worth having: a $19,000 exemption instead of $15,000, and brackets 60% wider.

Can I deduct my property taxes or mortgage interest?

No. Connecticut has no itemized deductions. Property tax paid to a Connecticut town on your home or car earns the $300 credit on Schedule 3 if your Connecticut AGI is under $49,500 single or $70,500 joint, less above that.

Is there a local income tax?

No. No Connecticut town levies one, and there are no county governments. The local tax here is the property tax, including the town’s annual bill on each car.

Get federal AGI right, then watch the lines on Connecticut AGI

The exemption, the add-back, the recapture, the personal credit and the property tax credit all turn on Line 5; a few thousand dollars of above-the-line adjustment can move all five.

Written by Charles Trautman, EA, editor  ·  Need to Know Tax, Lone Tree, Colorado
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Updated November 12, 2026, after the November 3 election · tax year 2026 figures · awaiting review by a Connecticut practitioner — use the right article