Tool | November 2017

State-by-State Guide to Taxes on Retirees


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The Bottom Line
Map of Connecticut

Least Tax-Friendly

One of Kiplinger's top ten least tax-friendly states for retirees, the Constitution State is a tax nightmare for many retirees. Its real estate taxes are some of the highest in the nation, and the relief seniors can get from them modest. Though Connecticut does not tax military pensions, it has no exemptions or tax credits for other types of pensions or other retirement income. And it taxes a portion of Social Security benefits for taxpayers above certain income thresholds.

State Sales Tax

The state taxes most items at 6.35%, but localities are not allowed to add to that. Jewelry valued at more than $5,000 and clothing, footwear and accessories priced at more than $1,000 per item are taxable at 7.75%.

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)

Effective income tax rate: 3.1%/individual, 5%/joint

Social Security

Social Security is exempt for individual taxpayers with federal adjusted gross income of less than $50,000 and for married taxpayers filing jointly with federal AGI of less than $60,000.

Exemptions for Other Retirement Income

Railroad Retirement benefits are exempt. Military pensions are excluded from state income tax.


Taxable at ordinary income tax rates.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Taxable at ordinary income tax rates.

Private Pensions

Taxable at ordinary income tax rates.

Public Pensions

Military pensions are excluded from state income tax. All out-of-state government and federal civil-service pensions are fully taxed.

Property Taxes

The median property tax on Conneticut's median home value of $269,300 is $5,443.

Tax breaks for seniors: Connecticut offers property tax credits to homeowners who are at least 65 years old and meet income restrictions. Income ceilings are $43,000 for married couples (with a maximum benefit of $1,250) and $35,300 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.

Vehicle Taxes

Sales tax is due at purchase: 6.35% for vehicles under $50,000; 7.75% for those over. In addition, vehicles are subject to an stiff annual levy, whether or not they're registered for use. The rates are set by individual municipalities. Legislation implemented in 2016 lowered the cap on these levies. For example, the owner of a $20,000 vehicle who lived in Hartford would pay $1,366 annually.

Inheritance and Estate Taxes

Connecticut imposes an estate tax on the transfer of estates valued at $2 million or more at a progressive rate starting at 7.2%. The rate rises to a maximum of 12% for an estate valued above $10.1 million. There is no inheritance tax.

Connecticut is the only state with a gift tax, which applies to real and tangible personal property in Connecticut and intangible personal property anywhere for permanent residents. Only the amount given after January 1, 2005, and over $2 million is taxed, starting at 7.2% of the excess and rising to $748,200 plus 12% of the excess over $10.1 million.