Complete Guide to Connecticut Payroll Taxes: Rates, Calculator & Compliance

Staying on top of payroll tax updates is a responsibility that every employer in Connecticut faces. Changes to tax rates or withholding requirements can directly impact your payroll processes and compliance with state laws. Addressing these updates promptly ensures accurate calculations and avoids unnecessary penalties.

For 2025, Connecticut payroll taxes include several updates employers need to implement immediately. Adjustments to withholding rules for retirement income and changes to unemployment insurance rates could affect your payroll calculations. Employers should review these updates thoroughly to ensure compliance.

Here's a straightforward breakdown of the latest changes to Connecticut state payroll taxes for 2025.

What's New for Connecticut Payroll Taxes in 2025

Connecticut has updated its rules for withholding tax on retirement income distributions. Employers and payers are no longer required to withhold state income tax on lump sum distributions unless the distribution exceeds $5,000 or represents more than 50% of the account's total balance. Employees can still request withholding by completing Form CT-W4P.

The employer unemployment insurance (SUI) tax rate for 2025 has also changed. The new standard rate for most businesses is 2.2%, although specific rates may vary depending on the employer's experience rating. Employers should refer to their rate notice from the Connecticut Department of Labor for the exact percentage.

These updates require immediate attention to ensure that payroll systems, withholding processes, and tax filings reflect the current requirements. Neglecting to address these changes could result in incorrect withholdings or penalties for non-compliance.

State Income Tax Requirements and Filing Statuses

Connecticut applies a progressive tax system to income earned within the state. The rates begin at 2% and increase up to 6.99% based on taxable income. Higher earnings are subject to higher tax rates, making accurate withholding calculations a priority for employers.

Filing Statuses and Personal Exemptions

Connecticut assigns specific withholding codes to employees, which determine personal exemption amounts. These codes align with the employee's filing status and affect how much tax is withheld from their paycheck. Here's how the withholding codes are structured:

Code A: Married, filing separately, or married filing jointly with both spouses working and a combined income of $100,500 or less.
Code B: Head of household.
Code C: Married, filing jointly, with a non-working spouse.
Code D: Married, filing jointly, with both spouses working and a combined income over $100,500.
Code F: Single.

Each filing status comes with its own personal exemption amounts, which reduce taxable income. For example, a single filer (Code F) earning $35,000 annually would receive a $9,000 exemption, while a married employee under Code A with $25,000 in wages would qualify for a $10,000 exemption. Employers must ensure withholding aligns with these figures.

Residents Working Out of State

Connecticut residents who earn wages in another state are taxed on all income, regardless of where it is earned. Out-of-state employers typically withhold income tax for the state where the employee works. If the employer is also registered in Connecticut, they must calculate and withhold Connecticut income tax for any amount exceeding the out-of-state withholding.

Employees in this situation file both a nonresident return in the work state and a resident return in Connecticut. They can claim a credit on their Connecticut return for taxes paid to the other state. However, the credit is limited to the smaller amount between the tax paid to the work state or the Connecticut tax on those wages. This ensures Connecticut residents avoid double taxation while meeting both states' tax responsibilities.

Withholding Guidelines for Residents and Nonresidents

Connecticut requires employers to withhold state income tax on wages earned for work performed within its borders. This applies to both residents and nonresidents who provide services in the state. Employers must ensure accurate withholding to comply with Connecticut's tax laws and avoid penalties.

Nonresident Telecommuters and the Convenience of the Employer Test

Nonresident telecommuters working for Connecticut employers may owe state income tax even if they perform their duties outside the state. Under the "convenience of the employer" test, wages can be taxed in Connecticut if the remote work arrangement benefits the employee rather than meeting a specific business necessity. Employers must assess whether the remote work location is truly required by the company or simply convenient for the employee. This distinction directly impacts whether wages are considered Connecticut-sourced income.

Filing Returns for Multiple States

Employees living in Connecticut but working in another state will need to manage tax obligations in both locations. Employers are responsible for withholding income tax for the state where the employee works. If the employer is registered in Connecticut, they must also withhold additional Connecticut income tax when the tax owed to Connecticut exceeds the amount withheld for the work state.

Employees in this scenario must complete two tax returns:

A nonresident return for the state where income is earned.
A resident return for Connecticut, reporting all income earned, regardless of location.

The Connecticut resident return allows employees to claim a tax credit for income taxes paid to the other state. However, the credit is limited to either the amount paid to the other state or the Connecticut tax on that same income—whichever is lower. Employers should verify payroll systems are configured to handle these withholding calculations accurately.

Registering Your Business and Remitting Taxes

To stay compliant with Connecticut state payroll taxes, every employer must register their business and follow the correct process for withholding and remitting taxes. The state requires separate registrations for income tax withholding and unemployment insurance, along with strict rules for electronic filing and payments.

Registering with the Department of Revenue Services

Employers must register with the Department of Revenue Services (DRS) to withhold Connecticut income taxes. Use the myconneCT portal to complete the registration process. This applies whether you're starting a new business, already registered for other Connecticut taxes, or acquiring an existing business. If you've purchased a business, you'll need to obtain a new Connecticut Tax Registration Number under your ownership.

The Tax Registration Number and Federal Employer Identification Number (EIN) are required on all forms and correspondence related to Connecticut income tax withholding. Keeping these identifiers accurate ensures proper tracking of filings and payments.

Registering with the Connecticut Department of Labor

In addition to income tax withholding registration, employers must register with the Connecticut Department of Labor to pay unemployment insurance taxes. This step is mandatory for any employer operating in the state. Registering with both the DRS and the Department of Labor ensures full compliance with Connecticut payroll tax requirements.

Filing and Paying Taxes Electronically

Connecticut requires all payroll tax filings and payments to be submitted electronically. Employers must file quarterly and annual reconciliation forms, as well as remit all payments through the myconneCT portal. Options for payment include:

Direct Payment: Allows the DRS to withdraw the payment directly from your bank account on a specified date.
Credit or Debit Card: Enables payment via card, though a convenience fee applies.

Non-electronic payments are penalized unless a waiver has been granted, and late payments accrue penalties and interest. Filing electronically and on time ensures compliance and avoids unnecessary fines. Employers should review all filing deadlines and payment methods to prevent errors when handling Connecticut state payroll taxes.

Unemployment Insurance (SUI) and Rates

Connecticut employers are required to pay State Unemployment Insurance (SUI) taxes to provide financial support for workers who lose their jobs. SUI tax rates and wage bases are set by the Connecticut Department of Labor and must be applied accurately each year. For 2025, the taxable wage base is $26,100.

Taxable Wage Base and Rate Ranges

The SUI taxable wage base for 2025 is capped at $26,100 per employee. Employers only pay SUI taxes on wages up to this amount per calendar year. Rates for experienced employers typically range from 1.9% to 6.8%, depending on the employer's history of unemployment claims and contributions. Businesses with a higher rate of unemployment claims may fall on the higher end of the range, while those with fewer claims may benefit from lower rates.

Requirements for New Employers

New businesses in Connecticut must register with the Connecticut Department of Labor to receive a tax rate. For 2025, the standard new employer SUI tax rate is approximately 2.2%. This initial rate will apply until the employer builds an experience history. Certain industries, such as construction, may have industry-specific starting rates due to higher unemployment risks.

Calculating and Remitting SUI Contributions

To calculate SUI contributions for each employee, multiply the taxable wages (up to $26,100) by the assigned SUI tax rate. For example, an employer with a 2.2% rate would contribute $574.20 annually for an employee earning $26,100 or more. Employers should verify they're applying the correct rate and wage base to avoid errors in calculations.

SUI taxes are due quarterly and must be submitted along with wage reports to the Connecticut Department of Labor. All filings and payments must be completed electronically. Missing a filing deadline or payment may result in penalties or interest charges. Employers should maintain a clear schedule of deadlines to ensure timely compliance.

Paid Family and Medical Leave (PFML) Program

Connecticut's Paid Family and Medical Leave (PFML) program helps employees maintain financial stability during family or medical leave. Employers are responsible for facilitating employee contributions and ensuring compliance with state requirements. Clear payroll practices are key to meeting these obligations efficiently.

Employee Contributions

The PFML program relies on employee-paid contributions, deducted directly from wages. The contribution rate is set at 0.5% of gross wages, capped at the Social Security wage base, which is $160,200 for 2025. For employees earning at or above this threshold, the maximum contribution is $801 annually. Employees with lower earnings contribute proportionally based on their wages.

Employer Responsibilities

Employers have specific tasks to fulfill under the PFML program. First, they must calculate and withhold the 0.5% contribution from each employee's paycheck. This deduction applies to all eligible employees, regardless of part-time or full-time status. Employers then remit the collected funds quarterly to the Connecticut Paid Leave Authority through its electronic filing system.

Accurate recordkeeping is also required. Employers must document each contribution amount, employee wage details, and total payments submitted. The state may conduct audits to confirm compliance with withholding and remittance rules. Noncompliance can result in penalties and financial liability for uncollected contributions.

Coverage and Exceptions

Most Connecticut employers participate in the PFML program. However, self-employed individuals can choose to opt in voluntarily with a minimum enrollment commitment of three years. Federal employees are exempt from the program. Additionally, employees covered by collective bargaining agreements signed before June 2021 may be excluded until the agreement is modified or renewed.

Employers with multi-state operations must only collect PFML contributions for employees working within Connecticut. Employees based in other states are not subject to these deductions, simplifying payroll for businesses with out-of-state operations.

Payment Deadlines and Annual Reconciliation

Meeting payroll tax deadlines in Connecticut is a straightforward but necessary part of running a compliant business. Late payments or incomplete filings can lead to financial penalties and additional stress for your team. A clear understanding of quarterly and annual requirements ensures your payroll process runs smoothly.

Quarterly Payment Deadlines

Connecticut employers must submit withholding tax and unemployment insurance payments every quarter by specific dates. These are non-negotiable deadlines:

First Quarter (January to March): Due April 30
Second Quarter (April to June): Due July 31
Third Quarter (July to September): Due October 31
Fourth Quarter (October to December): Due January 31 of the following year

Payments are made electronically through the myconneCT portal or the Connecticut Department of Labor's system for unemployment insurance contributions. Payments received after the deadline are considered late, regardless of filing status, and may incur penalties or interest charges.

Annual Reconciliation Filings

Annual reconciliation ensures all taxes withheld and reported during the year align with actual employee wages and employer contributions. Connecticut employers are required to file specific forms to complete the process:

Form CT-W3: The annual summary of Connecticut withholding tax, due January 31 of the following year. This form consolidates quarterly reports and confirms total withholdings.
Form CT-941: Although filed quarterly, the fourth-quarter filing acts as the final report for the calendar year.

Both forms must be filed online unless an exemption is granted. Employers should review all quarterly submissions before completing these forms to avoid discrepancies that could lead to additional inquiries.

Late Filing Penalties and Interest

Failing to meet deadlines results in penalties that can quickly add up. Connecticut applies a $50 penalty for late withholding tax filings, along with an additional 10% of the unpaid tax amount. Interest accrues monthly at a rate of 1% until the balance is cleared.

For unemployment insurance, late payments incur a penalty of 1% of the unpaid contributions per month. Missing wage report deadlines may lead to further fees. Keeping a detailed calendar of all filing and payment deadlines helps ensure your payroll remains accurate and compliant year-round.

Connecticut Payroll Tax Calculation Basics

Accurate payroll tax calculations in Connecticut begin with a clear process: determining gross wages, applying the correct exemptions and deductions, and calculating taxable wages. Each step requires precision to ensure compliance with state guidelines and updated tax tables.

Steps to Calculate Taxable Wages

To calculate taxable wages for Connecticut payroll taxes:

Start with Gross Wages: Include all taxable earnings such as base salary, hourly wages, commissions, and bonuses.
Deduct Pre-Tax Contributions: Subtract qualifying pre-tax amounts, such as retirement plan contributions or health insurance premiums.
Apply Personal Exemptions: Use the employee's filing status and withholding code to determine the appropriate exemption amount. For example, a single filer (Code F) earning $30,000 annually qualifies for a $15,000 exemption, reducing taxable wages by half.
Factor in Additional Adjustments: Include deductions like the PFML contribution or other applicable adjustments.

Each calculation must align with Connecticut's updated tax tables to ensure the correct withholding amount.

Example Paycheck Calculations

A sample calculation can illustrate how different filing statuses affect taxable wages:

Single Filer (Code F):
Gross wages: $1,800 biweekly.
Pre-tax deduction: $100 (retirement).
Biweekly exemption: $577.
Taxable wages: $1,800 - $100 - $577 = $1,123.
Married Filing Jointly (Code C):
Gross wages: $2,400 biweekly.
Pre-tax health deduction: $150.
Biweekly exemption: $923.
Taxable wages: $2,400 - $150 - $923 = $1,327.
Head of Household (Code B):
Gross wages: $2,000 biweekly.
No pre-tax deductions.
Biweekly exemption: $731.
Taxable wages: $2,000 - $731 = $1,269.

The filing status and corresponding exemption significantly impact the taxable wages and ultimately determine the withholding amount for state income taxes.

Importance of Staying Updated

Connecticut updates withholding tables every January. Even minor changes to rates or exemptions can influence withholding calculations. Employers must review these updates annually and adjust payroll systems to reflect the changes. Using outdated tables risks errors in withholding, which can lead to compliance issues or penalties. Staying informed ensures accuracy and keeps payroll operations running smoothly.

Tools, Resources, and Best Practices

Managing payroll taxes requires precision and access to reliable resources. Employers benefit from using state-provided materials, payroll calculators tailored to Connecticut's tax structure, and automated payroll systems that streamline compliance efforts. Here's a focused look at the resources and methods to simplify payroll tax responsibilities.

Official Connecticut Forms and Guides

The Connecticut Department of Revenue Services (DRS) offers forms and guides specifically designed to help employers calculate and remit payroll taxes accurately. Two forms, in particular, are key for payroll:

Form CT-W4: Employees use this form to report filing status and claim personal exemptions, directly impacting their withholdings.
Form CT-W4P: Designed for payees of retirement or annuity distributions, this form allows individuals to request Connecticut income tax withholding.

These forms are updated regularly, and employers should access them directly through the DRS website to ensure accuracy. Additionally, the DRS offers clear filing instructions and withholding guides that outline state rules and electronic filing requirements. Keeping these resources on hand minimizes errors and ensures compliance with Connecticut's payroll tax regulations.

Payroll Calculators with Connecticut-Specific Rates

Payroll calculators built to handle Connecticut's tax rates and exemptions simplify withholding estimates. The best payroll calculators automatically incorporate:

Progressive tax brackets from 2% to 6.99%: Calculators apply the correct rate based on income levels.
Personal exemption amounts by filing status: These tools use employee-reported filing codes (A, B, C, D, or F) to adjust taxable wages.
Current SUI rates and wage bases: Calculations account for unemployment contributions required for Connecticut employers.

Modern calculators also integrate deductions like the 0.5% Paid Family and Medical Leave contribution, ensuring accurate paycheck calculations. Employers should select calculators that are compatible with Connecticut's 2025 tax tables.

Automated Payroll Systems

Automated payroll systems handle the repetitive and often complex tasks associated with Connecticut state payroll taxes. These systems are particularly helpful for businesses processing multiple deductions or managing employees across state lines. Features include:

Electronic tax filing: Automatically submit quarterly and annual forms, such as CT-W3 and CT-941, to the DRS.
Automatic tax table updates: Ensure payroll calculations reflect Connecticut's latest rates and exemptions every year.
Real-time reporting: Generate detailed summaries of tax payments, employee contributions, and compliance data.

Automating payroll eliminates manual errors and reduces the risk of penalties for late filings or incorrect withholdings. Employers also save time by consolidating payroll, tax filing, and deduction tracking into one streamlined system.

Leveraging state-provided forms, accurate payroll calculators, and automated systems ensures payroll tax compliance while improving efficiency.

Frequently Asked Questions

Payroll taxes in Connecticut can be straightforward when you break them into their key components. Below are clear, concise answers to commonly asked questions so employers can confidently manage their payroll obligations.

What are the payroll taxes in Connecticut?

Connecticut payroll taxes include three primary components:

State Income Tax: A progressive tax ranging from 2% to 6.99%, depending on an employee's taxable income and filing status.
Unemployment Insurance (SUI): Funded by employers, with rates typically between 1.9% and 6.8% for experienced businesses. The taxable wage base for 2025 is $26,100, and new employers generally start at 2.2%.
Paid Family and Medical Leave (PFML): A 0.5% employee-paid contribution deducted from gross wages, capped at $160,200, the Social Security wage base for 2025.

Each component serves a specific purpose, and accurate calculations ensure compliance with state requirements.

How much is CT state tax on paychecks?

Connecticut's income tax brackets are progressive, with rates starting at 2% and reaching up to 6.99% for higher earnings. Taxable wages determine the applicable rate, and withholding amounts vary based on filing status and personal exemptions.

For example:

Income under $10,000 is taxed at 2%.
Income between $50,000 and $100,000 is taxed at 5.5%.
Income exceeding $500,000 is taxed at 6.99%.

Employers rely on withholding tables to apply the correct rate for each paycheck.

What is Connecticut state tax on salary?

Salaries in Connecticut are taxed using the same progressive rates applied to other wages, ranging from 2% to 6.99%. Employees do not face additional local or city income taxes, so only the state-level tax applies.

Employers calculate withholding amounts based on the employee's filing status, such as single or married, and their claimed exemptions. Exemptions reduce taxable income and directly impact the amount withheld from each paycheck.

What is the SUTA rate in CT?

The Connecticut SUTA rate depends on an employer's experience rating. Experienced employers pay rates from 1.9% to 6.8%, while new employers typically begin at 2.2%.

The taxable wage base for SUI contributions is $26,100 per employee in 2025. Employers calculate contributions by multiplying wages up to this threshold by the assigned SUTA rate. For example, an employer with a 2.2% rate would contribute $574.20 annually for each employee earning $26,100 or more.

Annual rate notices from the Connecticut Department of Labor provide specific rates. Reviewing these notices ensures employers remain compliant and apply the correct rate for the calendar year.

Navigating Connecticut payroll taxes may seem daunting, but with the right tools and resources, you can streamline the process and maintain compliance. We're here to help you tackle payroll tax challenges head-on, so you can focus on growing your business. Book a demo with us today to discover how our all-in-one HR solution simplifies payroll tax management and keeps you ahead of the game.