Connecticut is a state with a lot to offer. As you near retirement, your mind may wander to fulfilling your life's dreams; and for many, that involves relocating. Here's what you need to know about taxes if you're moving to the Nutmeg State.
Connecticut is a small state in the New England region in the northeastern part of the United States. Although a part of New England, it is considered a part of the ‘Tristate area’ along with New York and New Jersey because of its proximity to both. The state is known for its rustic beauty, brilliant history, amazing landscape, and of course, Yale University. When the time to retire comes, many people consider retiring in Connecticut with the dilemma of whether to stay in their current city or move somewhere new.
There are many factors to consider when deciding where to retire, including the cost of living, climate, access to healthcare, and recreation. Depending on where you currently reside, you may need to pay a little more if living in Connecticut. But is it worth it? If you're looking for reasons to retire in this state, you should become aware of its tax laws. With our office HQ residing in Guilford, CT, we know a thing or two about what you'll need to retire here. Here’s what you should know.
Connecticut Income Tax
Connecticut's state income tax structure is graduated, meaning that the amount people are taxed increases as their earned income increases. This is similar to the federal government's income tax system and differs from states that use a flat tax rate.
Additionally, while Connecticut has a higher sales tax rate than the national average, there are no local sales taxes charged, which produces a balancing effect for the net amount of taxes collected.
Connecticut personal income tax rates
Single, married filing separate
Married filing jointly
$500,001 or more
$1,000,001 or more
While the state doesn’t have a standard deduction, the personal exemption is $15,000 for single taxpayers and $24,000 for married couples.
Connecticut Sales Tax
The State of Connecticut has a single, statewide sales tax. Because there are no additional sales taxes imposed by local jurisdictions in Connecticut, the rate of 6.35% applies to the retail sale, lease, or rental of most goods and taxable services.
However, there are exceptions:
- The tax on the rental or leasing of a passenger motor vehicle for a period of 30 consecutive calendar days or less is 9.35%.
- A tax rate of 7.75% applies to the following: the sale for more than $50,000 of most motor vehicles, the sale for more than $5,000 of jewelry (whether real or imitation), the sale for more than $1,000 of an article of clothing.
- The sales and use tax rate is 4.5% on the sale of motor vehicles to a nonresident member, or a member and his or her spouse jointly, of the armed forces of the United States stationed on full-time active duty in Connecticut.
Connecticut Property Tax
Connecticut homeowners pay the fourth highest property taxes in the U.S., with an average effective rate of 2.14%. The state's average effective property tax rate is double the national average, which is 1.07%.
The state is unusual in that counties are not responsible for administering property taxes. Instead, cities and towns set rates and collect the taxes.
Connecticut Inheritance and Estate Tax
Connecticut does not have an inheritance tax, but that doesn't mean you can avoid paying state-level taxes on the property you inherit. If your grantor lived in a state that has an inheritance tax, it will probably apply to you as well.
This is especially true if your grantor lived in Kentucky, where all in-state property is subject to inheritance tax even if the inheritor lives out-of-state. If someone who lives out-of-state leaves you something, make sure to check the local laws in your grantor's state to see if you owe inheritance tax.
If you're looking to relocate to Connecticut for retirement, check out our guide for tips on estate and inheritance taxes.
If you're interested in starting your retirement in Connecticut, check out our pros and cons series here. It's important to look at your retirement plan and see if retiring here would benefit you.
Once you have estimated the amount of money you may need for relocating in retirement, a sound approach involves taking a close look at your potential retirement-income sources and seeing how far they will stretch in your chosen state.
At Agemy Financial Strategies, we want you to know we’re here to help you navigate retirement and any questions that come up during your retirement process, including relocation opportunities. As Fiduciary advisors, it's our duty to act on your behalf in finding the right solutions for your individual wants and needs.