Connecticut LLC Tax Guide — Complete Overview

Connecticut's tax landscape for LLCs includes personal income tax (3%-6.99%), a 6.35% sales tax, the Business Entity Tax (BET) on higher-revenue businesses, and an innovative pass-through entity tax (PET) that helps bypass the federal SALT cap. This page covers all tax obligations. For formation, see our LLC guide.

Connecticut LLC Tax Summary

How Connecticut LLCs Are Taxed

Default pass-through treatment:

• Single-member: Income on Schedule C, flows to CT Form CT-1040
• Multi-member: Federal Form 1065 + K-1s, members file CT-1040
• No entity-level income tax (unless PET or C-corp elected)

Connecticut Income Tax Rates

Plus: Connecticut imposes a 3% surcharge on adjusted gross income above $200,000 (single) / $400,000 (joint), increasing effective rates for high earners.

Pass-Through Entity Tax (PET) — Connecticut's SALT Cap Workaround

Connecticut pioneered the pass-through entity tax in 2018. This is a major advantage:

• LLC elects to pay Connecticut income tax at the entity level (6.99% flat rate)
• Members receive a dollar-for-dollar credit on their personal CT returns
• The entity-level tax is a fully deductible business expense on the federal return (not subject to the $10,000 SALT cap)
• Effectively makes Connecticut state income tax fully deductible federally for participating LLC members

Who benefits: Multi-member LLC members with income over $200K+ where the SALT cap costs them deductions. This can save $5,000-$20,000+ in federal taxes depending on income level.

See our tax elections guide for details.

Business Entity Tax (BET)

The BET applies to businesses with Connecticut gross receipts over $200,000:

Important: The BET is separate from income tax but partially credits against it. If your BET exceeds your income tax liability, the excess becomes your minimum tax due.

Sales Tax (6.35%)

Connecticut has a 6.35% state sales tax:

• Applies to tangible personal property, certain services, and digital goods
• Connecticut taxes MANY services (unlike states that exempt most services)
• Computer and data processing services: taxable (1%)
• Business analysis/consulting: generally exempt
• Repair services: taxable

Connecticut's broad service taxation makes it important to determine if YOUR services are taxable. See our sales tax page.

Key Deadlines

FAQ

Does my Connecticut LLC pay entity-level tax?

Not by default. Pass-through LLCs only pay entity-level tax if they elect the PET (pass-through entity tax). Otherwise, income flows to members' personal returns. The BET is a separate calculation based on gross receipts.

What is the BET and how does it work?

The Business Entity Tax is 0.75% on modified gross receipts for businesses exceeding $200K in CT gross receipts. It's partially credited against your income tax — think of it as a minimum tax based on revenue rather than profit.

Should my LLC elect the PET?

If your LLC has multiple members with income over $200K who are limited by the federal SALT cap ($10,000), the PET likely saves money. Connecticut was the first state to implement this workaround and it's now considered best practice for high-earning multi-member LLCs.

How does CT sales tax compare to neighboring states?

Connecticut: 6.35%. New York: 4% + local (8%+ in NYC). Massachusetts: 6.25%. Rhode Island: 7%. Connecticut's rate is moderate but it taxes more services than most states.