Connecticut Tax Cuts: Brackets, Retirement Income, and Credits

The Connecticut tax cuts now in effect combine a permanent reduction in the state’s two lowest income tax brackets, a phased-in exemption that makes traditional IRA distributions fully deductible starting in the 2026 tax year, a property tax credit of up to $300, and an annual August sales tax holiday. Most of the relief is aimed at middle-income households and retirees, and higher earners lose the benefit through a recapture mechanism.

Lower Rates on the First Two Brackets

Effective January 1, 2024, Connecticut cut its two lowest income tax rates for the first time since the mid-1990s, and those lower rates remain in place for 2026.¹ The 3% rate on the first slice of taxable income dropped to 2%, and the 5% rate on the next slice dropped to 4.5%.

The 2% rate covers the first $10,000 of taxable income for single filers and the first $20,000 for joint filers.
The 4.5% rate covers the next $40,000 for single filers and the next $80,000 for joint filers.

Above those bands, five higher brackets still apply, topping out at 6.99% on income over $500,000 for single filers.²

Who Loses the Cut: The Recapture

A separate recapture provision claws back the 2024 rate reductions for higher earners. It begins at $105,000 in Connecticut adjusted gross income for single filers, adding $25 in tax for every $5,000 of income above that threshold until the full $250 is recaptured at $150,000. Joint filers hit the same mechanism starting at $210,000, reaching the maximum $500 recapture at $300,000.³

A second, older recapture also exists. It eliminates the benefit of any income taxed below 6.99%, phasing in between $200,000 and roughly the top-bracket threshold for single filers and between $400,000 and higher for joint filers, with maximums of $3,150 and $6,300 respectively.³ Filers above the top of both ranges end up paying 6.99% on their entire taxable income.

Retirement Income Breaks

Connecticut has steadily broadened tax relief for retirees, and 2026 is the year the IRA piece fully arrives.

Traditional IRA Distributions

Distributions from traditional IRAs (not Roth IRAs) are phased in as a Connecticut deduction: 25% for the 2024 tax year, 75% for 2025, and 100% beginning in 2026.⁴ For your 2026 return, if your federal AGI is below $75,000 as a single filer or below $100,000 filing jointly, you can deduct 100% of your traditional IRA distributions on your Connecticut return.

Above those thresholds the deduction phases down in steps rather than disappearing at once: 85% just over the line, then 70%, 55%, and so on, dropping to 2.5% just below the top of the range and hitting zero at $100,000 for single filers and $150,000 for joint filers.⁴ If you are taking required minimum distributions, they qualify like any other traditional IRA withdrawal.

Pensions and Annuities

The same income thresholds and same graduated phase-out apply to qualifying pension and annuity income, including distributions from 401(k), 403(b), and 457(b) plans. Below $75,000 single or $100,000 joint federal AGI, the deduction is 100%.⁴

Social Security

Federally taxable Social Security benefits are 100% exempt from Connecticut income tax for single filers with AGI below $75,000 and joint filers below $100,000. Above those thresholds, a partial exemption ensures no more than 25% of total Social Security benefits are subject to state income tax.

Property Tax Credit

Connecticut residents can take a credit against state income tax for local property taxes paid on a primary residence or a registered motor vehicle. The maximum is $300 per return, claimed on Form CT-1040.⁵

The credit was expanded by Public Act 22-118, removing the earlier limit that reserved it for residents 65 or older or those claiming dependents. Any Connecticut resident can now claim it.⁶ The credit cannot exceed the property taxes actually paid or your income tax liability, whichever is less.

Single filers get the full $300 at Connecticut AGI of roughly $49,500 or below, with the credit phasing out around $109,500. Joint filers get the full credit at about $70,500 or below, phasing out around $130,500.⁶ Single filers can claim the credit for one motor vehicle; joint filers can claim up to two.⁵

Sales Tax Free Week in August

Each year, Connecticut suspends its 6.35% sales and use tax on most clothing and footwear items priced under $100 for one week in August, running from the third Sunday through the following Saturday. For 2026, that is August 16 through August 22.⁷

The $100 threshold applies per item, not per receipt. Five shirts at $80 each are all tax-free. A single jacket priced at $120, however, is fully taxable on the entire $120, not just the amount over the cap.⁷ Safety apparel and certain specialty items stay taxable regardless of price.⁸

Filing Deadlines and Estimated Payments

Your 2025 Connecticut income tax return is due April 15, 2026, matching the federal deadline.⁹

Estimated tax payments are required if your state income tax liability after withholding will be $1,000 or more and withholding alone won’t cover the required annual payment, which is the lesser of 90% of your 2026 tax or 100% of what you owed for 2025.¹⁰ Retirees who stop having Connecticut tax withheld from IRA distributions in 2026 because of the new full exemption should double-check that their overall withholding still covers tax owed on other income.

Payments for the 2026 tax year fall in four equal installments:

April 15, 2026
June 15, 2026
September 15, 2026
January 15, 2027

Underpayment on any installment accrues interest at 1% per month, calculated separately for each due date. Interest can be owed on an early installment even if a later payment covers the shortfall.¹⁰

1
Connecticut House Democrats. Tax Relief Measures 2024
2
Connecticut State Department of Revenue Services. Connecticut Income Tax Withholding Requirements
3
Connecticut General Assembly. A Guide to Connecticut’s Personal Income Tax
4
Connecticut General Assembly. Income Tax Exemptions for Retirement Income
5
Justia Law. Connecticut Code Title 12 – Section 12-704c
6
State of Connecticut. Governor Lamont Proposes Additional Tax Relief
7
Connecticut State Department of Revenue Services. Sales Tax Free Week
8
Connecticut State Department of Revenue Services. Examples of Clothing and Footwear That Are Exempt During Sales Tax Free Week
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Connecticut State Department of Revenue Services. Start of 2026 Tax Season
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Connecticut State Department of Revenue Services. Tax Information