Connecticut LLC Taxes: What You’ll Really Pay in the Constitution State (2025)

Connecticut wants your business—but they also want their cut. After helping dozens of entrepreneurs navigate Connecticut’s tax system, I can tell you this: The state’s relatively straightforward compared to neighbors like New York, but that $80 annual report fee and 6.35% sales tax can still sting.

Let me walk you through exactly what taxes you’ll face with a Connecticut LLC, plus some moves that’ll keep more money in your pocket instead of Hartford’s.

The Connecticut Tax Landscape: What’s Actually on Your Plate

Running a Connecticut LLC means juggling multiple tax obligations. Here’s your real checklist:

• Federal income tax (the IRS always gets theirs)
• Connecticut state income tax (3% to 6.99% depending on income)
• Connecticut Pass-Through Entity Tax (6.99% optional election)
• Sales and use tax (6.35% standard rate)
• Annual report fee ($80 yearly—not technically a tax, but feels like one)
• Payroll taxes (if you’re brave enough to hire)
• Local property tax (varies wildly by town)

Now let’s dig into what each actually means for your bank account.

Federal Taxes: The Same Show, Different Venue

The IRS treats your Connecticut LLC the same as any other state’s LLC. But since you’re paying Connecticut’s high cost of living, every federal tax dollar hurts more.

Single-Member LLC: Flying Solo in Connecticut

Own your LLC alone? The IRS “disregards” your entity for tax purposes. You’re essentially a sole proprietor with liability protection.

What you’ll pay:

• Income tax on Schedule C profits
• Self-employment tax: 15.3% on 92.35% of net earnings
• Quarterly estimates if you’ll owe $1,000+

Connecticut twist: With the state’s high expenses, many solo LLCs struggle to show profit. Track every legitimate expense—that Hartford parking fee, that Stamford coffee meeting, all of it.

Multi-Member LLC: The Partnership Path

Multiple owners means partnership taxation, which means more complexity.

Your federal obligations:

• Form 1065 due March 15th
• K-1s for each member
• Each member pays tax on their share
• Self-employment tax still applies

Reality check: Connecticut isn’t a community property state, so married couples can’t elect Qualified Joint Venture status. You and your spouse own the LLC? You’re filing as a partnership. Deal with it.

Corporate Elections: The Advanced Game

Thinking about electing S-Corp or C-Corp status? Let’s talk numbers:

S-Corp Election Threshold:

• Magic number: $70,000+ net income per member
• Below that? The extra accounting costs eat your tax savings
• Connecticut recognizes S-Corp elections (unlike some states)

C-Corp Election:

• Almost never makes sense for small Connecticut LLCs
• Double taxation plus Connecticut’s corporate tax
• Only consider with serious investor plans

Connecticut State Income Tax: The Graduated Squeeze

Connecticut uses a graduated tax system with rates from 3% to 6.99%. But here’s where it gets interesting—they also offer a Pass-Through Entity Tax that could save you money.

Standard State Income Tax

2025 Tax Rates (Single Filers):

• 3% on first $10,000
• 5% on $10,001 – $50,000
• 5.5% on $50,001 – $100,000
• 6% on $100,001 – $200,000
• 6.5% on $200,001 – $250,000
• 6.9% on $250,001 – $500,000
• 6.99% over $500,000

The Pass-Through Entity Tax Election (Your Secret Weapon)

Here’s something most Connecticut LLC owners miss: The Pass-Through Entity (PTE) Tax election.

How it works:

• Your LLC elects to pay 6.99% tax at entity level
• Members get an 87.5% credit on their personal returns
• Effectively caps your state tax rate

When it makes sense:

• High-income members (over $200,000)
• Want to maximize federal SALT deduction
• Have good cash flow for entity-level payments

The catch: Requires quarterly estimates and careful planning. Don’t elect this without talking to a CPA who understands Connecticut tax law.

Connecticut Sales Tax: The 6.35% Reality

Connecticut’s sales tax seems simple—6.35% on most goods and services. But the devil’s in the details.

Who Must Register

You need a seller’s permit if you:

• Sell physical products in Connecticut
• Provide taxable services (check the list—it’s extensive)
• Have economic nexus ($100,000 in sales or 200 transactions)
• Store inventory in Connecticut

Registration Process

Two ways to register:

Online (Recommended):

• Use myconneCT portal
• Immediate access
• Link all tax accounts

Paper (Avoid if Possible):

• Form REG-1
• 2-3 week processing
• More chance for errors

Sales Tax Quirks

Connecticut taxes some weird stuff:

• Computer and data processing services (taxable)
• Interior design services (taxable)
• Parking services (mostly taxable)
• Storage services (taxable)

But not:

• Most professional services
• Grocery food
• Prescription medications
• Manufacturing equipment

Always verify your specific situation. When in doubt, charge the tax. Better to refund than to owe penalties.

Annual Report: The $80 Annoyance

Every Connecticut LLC must file an annual report with the Department of Financial Institutions. Not the Department of Revenue—different agency, different system.

Key facts:

• Due date: Anniversary of formation
• Cost: $80 (non-negotiable)
• File online: Takes 5 minutes
• Miss it: Administrative dissolution

Payroll Taxes: The Employment Minefield

Hiring in Connecticut? Buckle up for complexity.

Your Employer Obligations

Federal level:

• Income tax withholding
• Social Security: 6.2% (you match)
• Medicare: 1.45% (you match)
• FUTA: 0.6% on first $7,000

Connecticut level:

• State income tax withholding
• State unemployment insurance (1.9% – 6.8%)
• Workers’ compensation insurance
• Connecticut Paid Family Medical Leave (0.5% from employees)

Registration Requirements

Before hiring, register with:

1. Connecticut Department of Revenue Services (withholding)
2. Connecticut Department of Labor (unemployment)
3. IRS (federal employer taxes)
4. Workers’ comp insurance carrier

Timeline: Start registration 4 weeks before first hire. Connecticut’s systems aren’t fast.

Why I Push Payroll Services Hard

Connecticut payroll compliance is complex enough that DIY almost guarantees mistakes. Use:

• Gusto: Best for 1-10 employees
• ADP: Better for 10+ employees
• Paychex: Good middle ground

Cost: $40-100/month. Penalties for one missed filing: $500+. Do the math.

Local Taxes: The Town-by-Town Surprise

Connecticut lets towns assess property tax on business personal property. Yes, they tax your laptop.

Personal Property Tax Process

1. Towns send declaration forms (usually March)
2. List all business property as of October 1st
3. Towns assess value and send bill
4. Rates vary: 20-40 mills typically

Greenwich vs. Hartford example:

• Same $10,000 in equipment
• Greenwich: ~$200 annual tax
• Hartford: ~$400 annual tax

Factor this into location decisions.

Vehicle Property Tax

Business vehicles get hit with local property tax too. That company car isn’t just a federal deduction—it’s a local tax target.

Tax Calendar: Critical Connecticut Dates

Monthly:

• Sales tax (if you owe $4,000+ annually)
• Payroll deposits (varies by size)

Quarterly:

• Estimated income taxes: April 15, June 15, Sept 15, Jan 15
• Sales tax (if under $4,000 annual threshold)
• Payroll reports

Annually:

• March 15: Partnership returns (Form CT-1065)
• April 15: Personal returns (Form CT-1040)
• Annual Report: Formation anniversary
• October 1: Personal property declaration

Random but Critical:

• May 31: Pass-Through Entity Tax election deadline
• Various town deadlines for property tax

Strategic Tax Moves for Connecticut LLCs

The Home Office Maximization

Connecticut’s high property costs make home office deductions valuable:

• Measure precisely (IRS loves to audit this)
• Photograph the space
• Keep utility bills
• Track all home maintenance

Average Connecticut home office: 200 sq ft = $3,000-5,000 annual deduction.

Retirement Contribution Strategy

With Connecticut’s high tax rates, retirement contributions become crucial:

• Solo 401(k): Shelter up to $69,000 (2025)
• SEP-IRA: Simpler but less flexible
• Defined benefit plan: For high earners over 50

Every dollar contributed reduces Connecticut taxable income.

Multi-State Planning

Live near the border? Consider:

• Forming in Massachusetts (lower annual fees)
• New York (different tax structure)
• Rhode Island (simpler system)

You can foreign-qualify in Connecticut and potentially save.

Equipment Timing

Section 179 lets you write off equipment immediately:

• 2025 limit: $1,220,000
• Buy in December, deduct full amount
• Includes vehicles (with limits)
• Software counts too

Time major purchases for maximum tax benefit.

Common Connecticut LLC Tax Mistakes

Mistake #1: Ignoring Quarterly Estimates

“I’ll pay it all in April” = penalties and interest. Connecticut wants money throughout the year.

Mistake #2: Missing Town Requirements

Each Connecticut town has different rules. Forming in Hartford? Different than forming in Westport. Research your specific town.

Mistake #3: Forgetting Use Tax

Buy something online tax-free? You owe Connecticut use tax. Most businesses ignore this until audit time. Don’t.

Mistake #4: Bad PTE Tax Election Timing

Elect Pass-Through Entity Tax without planning? You might increase your tax bill. This requires strategy, not impulse.

Mistake #5: Mixing Personal and Business

Connecticut auditors love finding personal expenses in business returns. Keep everything separate.

When Professional Help Becomes Essential

Connecticut’s tax complexity means most LLCs need professional help. Here’s when to hire a CPA:

Definitely need help if:

• Revenue over $100,000
• Multiple members
• Employees
• Multi-state operations
• Considering PTE tax election

Can maybe DIY if:

• Single member
• Under $50,000 revenue
• No employees
• Simple service business
• Strong accounting knowledge

Finding the right CPA:

• Connecticut-specific experience required
• Ask about PTE tax knowledge
• Verify they handle your industry
• Get fee structure upfront
• Check references

Connecticut-Specific Resources

State Contacts:

• DRS main line: 860-297-5962
• Business taxes: 860-297-4911
• myconneCT help: 860-297-4990

Online Tools:

• Tax calculator: portal.ct.gov/DRS/calculators
• Form library: portal.ct.gov/DRS/DRS-Forms
• Business portal: business.ct.gov

Best times to call:

• Tuesday-Thursday, 2-4 PM
• Avoid Mondays and month-end
• Be prepared with account numbers

The Bottom Line on Connecticut LLC Taxes

Connecticut isn’t the cheapest state for LLCs, but it’s not the worst either. Yes, you’ll pay that $80 annual report, deal with town property taxes, and navigate the 6.35% sales tax. But with proper planning—especially using the Pass-Through Entity Tax election if you qualify—you can minimize the bite.

The entrepreneurs who succeed in Connecticut are the ones who plan for taxes from day one, not the ones surprised by them in April. Budget 25-30% of revenue for combined taxes, keep meticulous records, and get professional help when needed.

Connecticut offers access to New York and Boston markets, educated workforce, and established business infrastructure. If those benefits outweigh the tax burden for your business, then form that LLC and get to work.

Just don’t forget that annual report. Seriously. Set that reminder now.

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Jake Lawson has reviewed every LLC formation service and guided over 1,200 entrepreneurs through the business formation maze. He knows Connecticut’s tax system inside and out—including which towns will nickel-and-dime you and which CPAs actually know their stuff. Get unvarnished advice about LLC taxes and formation at llciyo.com.