Connecticut Tax Information
Connecticut taxes Social Security income and pensions. Social Security income is partially taxed. Withdrawals from retirement accounts are fully taxed. Wages are taxed at normal rates. General pension and annuity earnings are exempt from income taxes for single filers and married people filing separately with annual adjusted gross income (AGI) under $75,000. Couples filing jointly with AGI under $100,000 also qualify for full exemption. Lawmakers modified exemptions for higher income earners beginning in the 2024 tax year. Some retirees with higher earnings will qualify for exemptions on a sliding scale.
Connecticut State Taxes
- Connecticut exempts the same amount of Social Security income from state tax that the federal government exempts.
- Connecticut has gift and estate taxes. Most residents will not owe these taxes since they apply only to gifts and estates exceeding $12.92 million.
- Pension and annuity benefits paid to nonresidents are not taxed.
Pension Information
- Pensionable pay can directly impact the amount of money received in retirement.
- In order to qualify for a full new state pension, you typically need to have a 35-year history of paying national insurance (NI) contributions.
Tax Withholding Information
- What is the state of CT tax withholding on pension payments? Withholding tax is the amount withheld from employee’s pay and sent to the government as partial payment of state income tax. The Connecticut state income tax is between 3.0%-6.7%.
- A Connecticut resident is subject to Connecticut income tax on all income regardless of where it is earned.
- Beginning Jan. 1, 2023, income tax withholding is required on pension and annuity distributions. The amount withheld must be substantially equal to the reasonably estimated tax due during the year. Laurie Phillips said the regulation is being forced in without enough time to properly prepare.
Other State-specific Tax Information
- In Kansas, retirees with an AGI of more than $75,000 are exempt from paying state taxes on their Social Security income, no matter their filing status.
- While avoiding state income taxes can be beneficial for retirees in states that don’t tax your pension, other costs to consider include property taxes, sales taxes, housing expenses, and insurance costs.