Connecticut Business Taxes at a Glance
Connecticut has a graduated income tax, a long history with pass-through entity taxation, and a large population that works in New York or manages investments. It is also the only state with its own gift tax. BOMCAS helps Connecticut individuals and businesses manage these rules and file accurately.
Personal Income Tax
Residents of Connecticut pay tax on all their income under graduated brackets, while nonresidents pay only on income from Connecticut sources. The return starts from federal adjusted gross income with Connecticut adjustments, and higher-income taxpayers lose the benefit of the lower brackets through a recapture provision. Connecticut has expanded exemptions for pension, annuity, and Social Security income for retirees within income limits.
We prepare Connecticut returns, apply retirement exemptions, and plan estimated payments, which are especially important for investors and business owners.
Working in New York
Many Connecticut residents commute to New York City or work for New York employers. New York taxes nonresidents on wages for work done in New York, and under its convenience-of-the-employer rule, it may also tax days worked from home in Connecticut. Connecticut gives residents a credit for income tax paid to other states, but the credit may not offset all of it, and New York City residents' taxes do not apply to Connecticut residents.
We review day counts and allocations, prepare New York nonresident returns, and claim the Connecticut credit.
The Pass-Through Entity Tax
Connecticut was the first state to impose a pass-through entity tax. From 2018 through 2023, partnerships and S corporations were generally required to pay it. Starting with 2024, the tax became elective. Entities that elect pay Connecticut tax at the entity level, and owners receive a credit on their personal returns.
Because owners may live in other states, and those states may or may not give credits for Connecticut's entity tax, the election is not automatic. We evaluate it each year, handle estimated payments, and track credits by owner.
Corporation Business Tax
C corporations doing business in Connecticut pay the corporation business tax on apportioned income, with a minimum tax. Large companies have also paid a surtax for a number of years. Connecticut uses unitary combined reporting. The former Business Entity Tax was repealed starting in 2020, so LLCs and S corporations no longer pay that separate annual fee. We prepare corporate returns and keep Connecticut adjustments organized.
Sales and Use Tax
Connecticut has a statewide sales and use tax with no local sales taxes. Meals at restaurants are taxed at a higher rate, and some luxury items are taxed at a higher rate too. Many services are taxable in Connecticut, as are digital goods and canned software. Businesses need a sales and use tax permit. Short-term rentals are subject to room occupancy tax.
We help businesses determine which services and digital products are taxable, register, prepare returns, and review use tax on purchases.
Estate and Gift Tax
Connecticut taxes estates above an exemption amount and taxes lifetime gifts in the same way. Large gifts during life are added to the estate tax base, so gifts above the exemption can create a Connecticut gift tax bill even if no federal gift tax is due. Every Connecticut estate generally needs a filing, even when no tax is owed. We help families track lifetime gifts, prepare the income tax side of estates and trusts, and work with estate counsel on planning.
Selling a Home or a Business
Connecticut imposes a real estate conveyance tax on property transfers, with higher rates on the portion of a residential sale price above a high threshold, and municipalities add their own conveyance tax. Owners selling a business or investment property also face Connecticut income tax on the gain, and pass-through entities may need to account for the PE tax election in the year of sale. We help sellers estimate the Connecticut tax effect in advance and prepare the returns that follow.
Payroll and CT Paid Leave
Connecticut payroll includes:
- State income tax withholding, using employees' Form CT-W4 elections
- Unemployment insurance with the Department of Labor
- CT Paid Leave contributions, withheld from employee wages and remitted quarterly by employers
Employers with remote employees in New York or other states need to withhold for the right state. Our payroll work includes the state filings and a reconciliation to the books each quarter.
Hedge Funds, Insurers, and Defense Manufacturers
- Hedge funds and investment management: partnership allocations, carried interest, and owners in several states
- Insurance and financial services: multistate apportionment and employees who commute
- Manufacturing and defense: fixed assets, inventory, and research credits on federal returns
- Health care: practice accounting and PE tax planning
- Hospitality along the shoreline: meals and room occupancy taxes and seasonal staff
Moving In or Out of Connecticut
People move between Connecticut, New York, and Florida in large numbers. In the year of a move, part-year returns are needed, and both states may examine domicile. Connecticut also expects residents who keep a home there and spend significant time in the state to be treated as statutory residents. We help clients document moves and prepare the right returns.
Books for Sales Tax, PE Tax, and Multistate Payroll
Connecticut books should track taxable services and digital goods separately for sales tax, owner allocations for the PE tax, and payroll by work location. We set up the chart of accounts and month-end close to provide these figures.
Reach BOMCAS About Connecticut
Commuters, fund partners, and Connecticut business owners can contact BOMCAS about New York credits, the PE tax election, or Connecticut gift and estate tax records. We work remotely with secure document exchange. City and service pages for Connecticut will appear under this section next. You can also visit the BOMCAS home page or our United States services. The information here is general and not personalized advice.
Talk to BOMCAS About Your Connecticut Taxes
Have a question about your Connecticut filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.