Connecticut Capital Gains Tax Rate (2026)
Connecticut capital gains tax overview
Seven brackets ranging from 2% to 6.99%. Connecticut taxes capital gains as ordinary income.
Federal + Connecticut combined rates
Your total capital gains tax bill includes both layers — federal and state. Here is what a Connecticut investor pays in 2026 for long-term gains:
| Federal Long-Term Rate | Connecticut State Rate | Combined Rate | Plus NIIT (if applicable) |
|---|---|---|---|
| 0% | 6.99% | 6.99% | 10.8% |
| 15% | 6.99% | 22.0% | 25.8% |
| 20% | 6.99% | 27.0% | 30.8% |
The NIIT (Net Investment Income Tax) adds an extra 3.8% for taxpayers whose MAGI exceeds $200,000 (single) or $250,000 (married filing jointly). It is a federal tax only — Connecticut does not have an equivalent.
How Connecticut compares to other states
Connecticut's top rate of 6.99% places it in the upper-middle tier of state capital gains taxation. For comparison:
- Zero-tax states (FL, TX, NV, etc.): 0% — total with 15% federal = 15%
- Low-rate states (AZ, IN, PA): 2.5–3.1% — total with 15% federal = 17.5–18.1%
- Connecticut: 6.99% — total with 15% federal = 22.0%
- High-rate states (NY, NJ): 10.75–10.9% — total with 15% federal = ~26%
- California: 13.3% — total with 15% federal = 28.3%
Tax-reduction strategies for Connecticut residents
With a top state rate of 6.99%, minimizing capital gains tax is particularly important in Connecticut. Key strategies:
- Hold over 1 year for long-term federal rates (0/15/20%). Connecticut does not offer a preferential state rate, but federal savings alone are often 7–17%.
- Tax-loss harvesting: Offset your gains with losses realized in the same year. A $20,000 loss offsets $20,000 of gains dollar-for-dollar, saving up to 27% ($5,398) on that $20,000 at top rates.
- 0% bracket planning: In lower-income years (retirement, sabbatical, between jobs), realize gains at the federal 0% rate. You still owe Connecticut state tax, but eliminating the federal component is significant.
- Donate appreciated stock directly to charity or a donor-advised fund to avoid capital gains tax entirely while generating a charitable deduction for the full fair market value.
- Installment sales: If selling a business or real estate, structuring as an installment sale spreads the gain over multiple years, potentially keeping each year's gain in a lower bracket.
Detailed Connecticut capital gains tax rules
Tax history and legal basis
Connecticut has taxed capital gains as ordinary income since its income tax was enacted in 1991. The state uses a progressive rate structure.
Exemptions and special treatment
Connecticut does not offer a preferential long-term capital gains rate or exclusion. However, the state has a unique 'tax recapture' provision where taxpayers owing below a certain threshold may owe an additional amount. Social Security income is partially exempt.
Filing requirements
File Form CT-1040 (resident). Connecticut starts with federal AGI and makes adjustments. The state requires estimated payments if you expect to owe $1,000+. Filing deadline is April 15.
Recent changes and legislative updates
Connecticut's top rate is 6.99%, but a surcharge (up to 20% of tax liability) can apply to high-income taxpayers, effectively raising the top rate to ~8.39%. The 2023 budget maintained the surcharge through 2025. There are also phase-outs of tax credits for high earners.
Worked example: $50,000 capital gain in Connecticut
Here's exactly what a Connecticut resident would owe on a $50,000 long-term capital gain with $80,000 in other income (single filer, 2026):
| Component | Amount | Notes |
|---|---|---|
| Capital gain | $50,000 | Long-term (held over 1 year) |
| Federal tax (15%) | −$7,500 | Based on $80,000 ordinary income + gain |
| Connecticut state tax (5.5%) | −$2,750 | Applied to the full gain amount |
| Total tax owed | −$10,250 | Federal + state combined |
| You keep | $39,750 | 79.5% of your gain |
After both federal and Connecticut state tax, you keep $39,750 of your original $50,000 gain. The effective combined rate is 20.5%.
Frequently asked questions — Connecticut
Does Connecticut tax short-term and long-term gains differently?
No — Connecticut taxes both short-term and long-term capital gains as ordinary income at the same rates as wages. There is no state-level preferential rate for patience. The federal system, however, taxes long-term gains at 0/15/20% vs. up to 37% for short-term — a significant difference that applies regardless of state.
Do I need to file a Connecticut tax return if I only have capital gains?
If you have capital gains income and meet Connecticut's filing threshold, you are required to file a Connecticut state income tax return. The threshold is typically similar to the standard deduction amount — check the CT Department of Revenue for the current year's filing requirements.
What if I moved to Connecticut mid-year?
If you moved to Connecticut during the year, you are a part-year resident. Connecticut generally taxes capital gains realized while you were a Connecticut resident. Gains realized before you moved may be taxable by your prior state. Keep detailed records of when each sale occurred relative to your move date.