Connecticut does not tax capital gains at a special rate. A gain from stocks, a business or real estate is part of your federal adjusted gross income, and Connecticut taxes the whole of that income on one graduated schedule. What makes the Connecticut bill different from the headline rate is that the schedule is followed by two extra charges, a phase-out of the 2% bracket and a tax recapture, which fall on higher incomes and raise the effective cost of a large gain.
This guide uses the Department of Revenue Services' 2025 Form CT-1040 instructions (revised 12/25), its 2025 nonresident and part-year instructions (revised 12/25), its 2026 withholding publication, two chapters of the Connecticut General Statutes on the General Assembly website, the Office of Legislative Research reports on the 2025 and 2026 tax acts and two IRS pages, all read in November 2026. The statute chapter we read carries a note that the 2026 Supplement holds changes made in the 2025 sessions, and we did not read that supplement; the Office of Legislative Research reports are how we checked for 2025 and 2026 changes.
The statute imposes a tax on the Connecticut taxable income of each resident, and its schedule applies to taxable years commencing on or after January 1, 2024. The Department's 2025 instructions give the schedule below for single filers and married individuals filing separately; head of household and joint filers have their own schedules (the statute sets out a separate schedule for head of household), so use Table B of the instructions for those statuses.
| Connecticut taxable income (single or married filing separately, 2025 return) | Initial tax |
|---|---|
| Up to $10,000 | 2.00% |
| $10,000 to $50,000 | $200 plus 4.5% of the excess over $10,000 |
| $50,000 to $100,000 | $2,000 plus 5.5% of the excess over $50,000 |
| $100,000 to $200,000 | $4,750 plus 6.0% of the excess over $100,000 |
| $200,000 to $250,000 | $10,750 plus 6.5% of the excess over $200,000 |
| $250,000 to $500,000 | $14,000 plus 6.9% of the excess over $250,000 |
| Over $500,000 | $31,250 plus 6.99% of the excess over $500,000 |
The Department has not published instructions for 2026 returns as of our November 2026 reading. Its withholding publication for 2026 (IP 2026(7), effective January 1 through December 31, 2026) uses the same Table B bracket amounts and rates for single filers, so we have no sign of a rate change for 2026, but that publication is a withholding guide, not the return schedule. The Office of Legislative Research's reports on the 2025 and 2026 tax acts list no change to the income tax rates or to the taxation of capital gains. Bills to add a capital gains surcharge were introduced in 2026; the Senate bill (SB 510) was last shown as tabled on the Senate calendar on April 20, 2026, and we found no enacted surcharge. Check the Department before planning a later sale.
Form CT-1040 Line 1 tells you to enter your federal adjusted gross income from your federal return. Connecticut adjusted gross income on Line 5 is Line 3 minus Line 4, that is federal adjusted gross income plus Schedule 1 additions minus Schedule 1 subtractions. The instructions add that your federal adjusted gross income may not be further modified except as the statute expressly provides. A gain that is on your federal return is therefore already in your starting figure.
The gain-related items we saw in the Schedule 1 instructions are narrow. Line 47 lets you subtract gains from the sale or exchange of notes, bonds or other obligations of the State of Connecticut or its municipalities, and another subtraction covers interest, dividends or capital gains earned on contributions to Connecticut Homecare Option Program accounts. We found no general capital gains subtraction, and no lower rate for long-term gains. For the federal rules that decide whether a gain is short-term or long-term, IRS Topic 409 says that if you hold an asset for more than one year its gain or loss is generally long-term, that net short-term gains are taxed as ordinary income at graduated rates, and that a lower rate may apply to a net capital gain. That federal split changes your federal bill, but the Connecticut schedule above does not use it. The same IRS topic limits a net capital loss that exceeds your gains to the lesser of $3,000 ($1,500 if married filing separately) or your net loss, with the rest carried forward; because Connecticut starts from federal adjusted gross income, our reading is that a resident's Connecticut figure follows that federal result, which the Department's resident instructions we read do not say directly.
The Tax Calculation Schedule does not stop at the bracket tax. Line 7 adds Line 4 (the initial tax from Table B), Line 5 (a 2% rate phase-out add-back from Table C) and Line 6 (a tax recapture from Table D). The statute's phase-out reduces the amount taxed at 2% as Connecticut adjusted gross income rises. For a single filer, the instructions' Table C add-back reaches $250 once Connecticut adjusted gross income is above $101,500, and Table D recapture climbs in steps to $2,950 between $345,000 and $500,000. So a gain that lifts your income through those steps also triggers those steps, and the extra tax it adds can be a higher share of the gain than the bracket rate alone.
The two examples below are ours, not the Department's. They use the 2025 instructions for a single filer with no dependents, taking the tax as the sum of the Table B bracket tax, the Table C add-back and the Table D recapture. At these incomes the personal exemption in Table A is zero (it is zero from $44,000 for singles) and the last Table E credit row for singles ends at a Connecticut adjusted gross income of $64,500, so we apply no exemption or credit. We assume the gain is the only change and ignore all other credits and modifications.
| Single filer, 2025 (our arithmetic) | Connecticut AGI | Tax |
|---|---|---|
| Example 1, before the gain | $100,000 | $4,975 |
| Example 1, with a $50,000 gain | $150,000 | $8,225 |
| Tax added by the gain | $3,250 (6.5% of the gain) | |
| Example 2, before the gain | $250,000 | $15,400 |
| Example 2, with a $100,000 gain | $350,000 | $24,100 |
| Tax added by the gain | $8,700 (8.7% of the gain) |
In example 1 a $50,000 gain on top of $100,000 adds $3,250, or 6.5% of the gain, and in example 2 a $100,000 gain on top of $250,000 adds $8,700, or 8.7% of the gain. Your own figure will differ with filing status, exemptions, credits and other modifications, so run the Department's Income Tax Calculator on myconneCT or the Tax Calculation Schedule for a real estimate.
The statute taxes residents on Connecticut taxable income and taxes each nonresident on Connecticut taxable income derived from or connected with sources within the state. The nonresident and part-year instructions we read are for the 2025 return. They say nonresidents and part-year residents calculate the tax in the same manner as resident individuals and then prorate it by the percentage of their Connecticut adjusted gross income that comes from Connecticut sources.
On sourcing a gain, the 2025 instructions say to include capital gains derived from real or tangible personal property located within Connecticut, whether or not connected with a trade or business, and capital gains from stocks, bonds and other intangible personal property used in or connected with a business, trade, profession or occupation carried on in Connecticut. They add that gains and losses from the sale of real property are not subject to apportionment, that certain gains from selling an interest in an entity that owns real property in Connecticut must be reported (for this purpose real property owned directly or indirectly by a partnership, limited liability company or S corporation counts), and that federal basis is used in every case. A nonresident whose Connecticut-source transactions produce a net capital loss may claim at most $3,000 of it ($1,500 if married filing separately) on the Connecticut return, with the balance carried forward. In the passages we read, a gain on stock held as an investment by a nonresident is not listed as Connecticut-source, but we do not state a rule for it; ask the Department or a preparer.
We found no Connecticut-specific home sale rule in the sources we read. IRS Topic 701 says you may qualify to exclude up to $250,000 of the gain from your income, or up to $500,000 if you file a joint return with your spouse. Because Connecticut starts from federal adjusted gross income and the Department says that figure may not be modified except as the statute provides, our reading is that gain excluded federally is not in your Connecticut starting figure, but the Department does not say so in the pages we read, so confirm it for a large sale.
Connecticut once had a separate tax on dividends, interest and capital gains. Chapter 224 of the General Statutes is still titled Dividends, Interest Income and Capital Gains Tax, and Section 12-506 imposed that tax, at four and three-fourths per cent on gains. But Section 12-522a says the chapter does not apply to dividends, interest income or gains earned, received or accrued in any taxable year commencing on or after January 1, 1992. We found no other separate Connecticut tax on capital gains or dividends, including any tax at 2.5%, in the sources we read. The rates that apply to gains today are the income tax schedule above.
The Department's 2026 withholding publication lists capital gains among income that is not subject to Connecticut income tax withholding, so a large sale can leave you owing at filing unless you have made estimated payments or raised withholding elsewhere. The Department's estimated tax page says you must make estimated payments for 2026 if your Connecticut income tax after withholding and credits is $1,000 or more and withholding will be less than your required annual payment, which is the lesser of 90% of your 2026 tax or 100% of your 2025 tax (if you filed a 12-month 2025 return). For a calendar-year taxpayer the installments of 25% each are due April 15, June 15 and September 15, 2026 and January 15, 2027.
One further effect of a gain: the Connecticut earned income tax credit cannot be claimed if investment income is more than $11,950 on the 2025 instructions, and investment income includes the capital gain net income from federal Form 1040, Line 7a, if more than zero.
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