How Connecticut’s Business Taxes Compare to Neighboring States

When running a business, understanding the local tax landscape is essential for making informed decisions. If you’re considering expanding or starting a business in Connecticut, knowing how the state’s taxes compare to neighboring states is crucial. Whether you’re looking for accounting services in Connecticut or evaluating tax implications, understanding the state’s business tax structure can help you make better decisions. 

This guide compares Connecticut’s business taxes to those in New York, Massachusetts, and Rhode Island to give you a clearer picture of what to expect.

Connecticut’s Business Tax Structure

Connecticut’s tax system includes several types of business-related taxes. Here’s what business owners need to know for 2025:

Corporate Income Tax

Connecticut charges a flat corporate tax rate—but large businesses may face a temporary surtax.

• Base corporate income tax rate: 7.5%

• Surtax: 10% for corporations with gross income above $100 million

• Effective rate with surtax: 8.25%

• Surtax applies to tax years beginning before January 1, 2026

Capital Base Tax

In addition to income, Connecticut taxes a business’s capital—though this tax is on the way out.

• Tax rate: 0.26% (2.6 mills per dollar of capital)

• Maximum liability: $1,000,000

• Scheduled for full elimination after 2026

Minimum Tax

Even if your business doesn’t owe much based on income or capital, a minimum tax still applies.

• Flat minimum tax: $250 if your calculated tax is below this threshold

Pass-Through Entity (PTE) Tax

Connecticut stands out by taxing pass-through entities at the entity level—something neighboring states don’t do.

• Tax rate: 6.99% on Connecticut-sourced income

• Most of this tax is credited back to owners on their personal income tax returns

• Designed to help business owners manage federal SALT deduction limits

✅ Still doing accounting the old way? Your competitors aren’t. Counto’s AI handles the boring stuff while experienced accountants ensure everything’s perfect. See the future of accounting here. 

How Connecticut Compares to Neighboring States

To see where Connecticut stands, let’s compare the key business taxes across neighboring states:

Corporate Income Tax Rates

Each state sets its own corporate tax rate, which can significantly affect profitability.

• Connecticut: 7.5% (or 8.25% with surtax for large businesses)

• New York: 6.5%

• Massachusetts: 8.0%

• Rhode Island: 7.0%

Capital Base and Franchise Taxes

Not all states tax business capital, but Connecticut does—at least for now.

• Connecticut: Yes (phasing out after 2026)

• New York: Yes (franchise tax on business capital)

• Massachusetts: No

• Rhode Island: No

Minimum Corporate Taxes

Minimum taxes can be a burden for smaller businesses, especially in slower years.

• Connecticut: $250

• Massachusetts: $456

• Rhode Island: $400

Other Key Taxes in Connecticut

Besides income taxes, there are other taxes that impact business owners in Connecticut:

Sales and Use Tax

Connecticut charges a statewide sales tax, which businesses must collect from customers on taxable goods and services.

• Statewide rate: 6.35%

Property Tax

Connecticut’s property taxes are among the highest in the US and often affect businesses with real estate or large equipment.

• Effective property tax rate: 1.92%

• Property taxes make up a major share of state and local revenue

Pass-Through Entity Tax (Recap)

Connecticut’s PTE tax is unique in the region and helps business owners navigate federal tax limitations.

• Tax rate: 6.99%, credited back to owners

• Not implemented in New York, Massachusetts, or Rhode Island

Summary

Connecticut offers a mix of business tax features that set it apart in the region. While its base corporate income tax rate is slightly lower than Massachusetts, the temporary surtax pushes it higher for large businesses. The capital base tax, though being phased out, still exists in 2025. Connecticut’s $250 minimum tax is more favorable than the higher minimums in Massachusetts and Rhode Island, but the state’s high property taxes can be a major drawback. What really makes Connecticut unique is its pass-through entity tax, which offers relief for business owners affected by the federal SALT cap. For any business operating in Connecticut or thinking of making the move, working with experienced accounting professionals can help you stay compliant and make the most of your tax position.

Your Books, Automated. Your Questions, Answered.

Manual bookkeeping eats into time you could spend growing your business. Traditional accounting services charge more but still need constant guidance. There’s a better way.

Counto’s modern accounting solution combines AI that learns your business with expert human oversight. Once our system understands your patterns, it handles daily bookkeeping automatically. Professional accountants review everything for accuracy, and you get instant access to your dedicated Customer Success Manager via SMS or phone—no more waiting for answers about your finances.

Join forward-thinking businesses who’ve upgraded to intelligent accounting that adapts to you, not the other way around. Ready for accounting that actually gets your business? Chat with us now, email [email protected], or use our contact form.

Here are some articles you might find helpful:

How Much Does an Accountant Cost?

Accounts Payable Process for SMEs

What is Accounts Receivable?