Skip to content
Join the waitlist

Accounting and state tax in Connecticut

Connecticut taxes corporations at 7.5% of apportioned income, with a 10% surtax that reaches every combined group, a $250 minimum and an NOL cap at half of income.

Jurisdiction
Connecticut
Reading time
3 min
Checked
October 12, 2026
Point at another state to compare its accounting.

Key figures

Connecticut accounting

2026, with sources

Corporation business tax rate
7.5%On apportioned net income.
Surtax
10% of taxGross income of $100M+ or a combined unitary filer; not on the $250 minimum.
Minimum tax
$250
Capital base tax
Phasing outPhasing out; rate fell from .0026 to .0021 in 2025.
NOL deduction
Capped at 50% of pre-NOL income20 years for 2000–2024 losses; 30 years from 2025.
Income tax economic nexus
$500,000Receipts from Connecticut sources.
IRC § 174A
Conformity delayed one year2025: add back, use pre-OBBBA § 174; 2026 on: follows § 174A.

One rate, a surtax and a vanishing capital tax

Connecticut’s corporation business tax starts from federal taxable income (line 28 of Form 1120), applies Connecticut modifications, apportions, deducts net operating losses and applies 7.5%. The company pays the greater of that net income base tax or a capital base tax, and at least $250. The capital base tax is being phased out; DRS reports its rate falling from .0026 to .0021 in 2025, on the way to zero.

On top sits a 10% surtax on the tax before credits for companies with $100 million or more of gross income, or that file as part of a combined unitary group. The surtax does not apply to the $250 minimum. Credits generally cannot reduce the tax by more than 50.01%, which matters for a company counting on R&D credits to wipe out its bill.

Combined reporting and single-sales apportionment

Connecticut requires combined unitary reporting: commonly owned companies engaged in a unitary business file one Form CT-1120CU. From 2025, the $2.5 million cap that limited how much more tax a combined group could owe than its nexus members alone was eliminated, and the 2015 election some groups made to preserve NOLs sunsets, so those groups must recompute their carryovers.

Most companies apportion by the share of their sales made in Connecticut. A corporation also has income tax nexus once it has $500,000 or more of receipts from Connecticut sources, even with no people or property in the state. A Boston SaaS company with $600,000 of Connecticut customers files a CT-1120 before it ever hires there.

Book-tax differences to expect

Each of these produces a Connecticut-only temporary difference in the state tax provision. The NOL limit is the one founders feel: a company that lost $4 million over three years and then earns $1 million of apportioned Connecticut income can deduct only $500,000, and pays 7.5% (plus any surtax) on the rest.

  • Bonus depreciation is added back; 80% of the IRC § 179 deduction is added back.
  • Connecticut decoupled from § 168(n) accelerated depreciation for qualified production property.
  • R&E: 2022–2025 follows § 174 as of July 3, 2025; § 174A applies from 2026; no § 70302(f) retroactive deduction.
  • NOLs offset at most 50% of pre-NOL income, so a company with large losses still pays tax in its first profitable years.

Deadlines

  1. 15th day of the 5th month (May 15 for calendar years)Corporation business tax returnForm CT-1120 / CT-1120CU
  2. By the original due dateExtension to the 15th day of the 11th month; tax still due on the original dateForm CT-1120 EXT
  3. 15th day of months 3, 6, 9 and 12Estimated tax: 30%, 70%, 80%, 100% of prior-year tax cumulativelyForm CT-1120 ESA–ESD

The federal baseline

This page covers what Connecticut adds. The federal rules underneath it apply here too.

FederalFederal accounting for startupsFederal law sets the tax rules, not the bookkeeping ones: US GAAP comes from the FASB and from what investors expect, while Form 1120, the cash-method test and Section 174 come from the IRS. Every state builds its corporate tax on this return.

Common questions

Is the 10% surtax only for big companies?

Often, yes. Connecticut’s DRS says the 10% surtax applies to companies with $100 million or more of gross income or that file as part of a combined unitary group. A parent and operating subsidiary filing Form CT-1120CU are a combined group, so the surtax can reach a startup long before $100 million of revenue.

Can we expense R&D in Connecticut the way we now can federally?

Not for 2025. Connecticut delayed its conformity to § 174A by one year: a corporation that expensed domestic R&E under § 174A on its 2025 federal return adds it back for Connecticut and amortizes under § 174 as it stood on July 3, 2025. From income years beginning in 2026, Connecticut follows § 174A, but it disallows the small-business retroactive deduction under § 70302(f).

Accounting next door

How Connecticut compares

Founder guides on this

Works in your QuickBooks Online or Xero file

Want accounting handled?

Lopifi is building AI bookkeeping that keeps your books closed on US GAAP and watches deadlines like these, with a CPA review every quarter, for $200 a month. We’re not open yet.

$200/month when we open. No card now.

More of the Connecticut guide

Sources

Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.

General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.

All state guides