Rental Property Taxes in Connecticut (2026 Guide)

1. Property Tax: the Mill-Rate System

Connecticut has no statewide property tax — every city and town sets its own mill rate (dollars of tax per $1,000 of assessed value), and assessment is pegged at 70% of fair market value. There is no separate rental-vs-owner assessment ratio: a rental and an owner-occupied home on the same street are assessed the same way.

What makes Connecticut expensive is the level of the mill rates. Effective property-tax rates commonly run between ~1.5% and ~2.1% of market value, and high-mill cities push higher — among the steepest in the nation. Budget property tax as a major, ongoing line on every Connecticut rental.

Connecticut taxes motor vehicles separately from real property (also via the municipal mill rate, recently subject to a statewide cap). For a rental property, the line that matters is the real-property mill rate of the town the building sits in — verify it with the local assessor before you underwrite a deal.

The property-tax credit on the Connecticut income tax return is limited to a primary residence (and motor vehicle) — it does not cover tax paid on a rental property. As a landlord you deduct property tax as a rental expense on Schedule E federally, but you get no state property-tax credit for it.

2. Connecticut Income Tax

Connecticut has a graduated income tax topping out at 6.99% (seven brackets starting at 2%); SheltrIQ's engine computes the exact liability including Connecticut's benefit-recapture/phase-out add-backs.

Seven brackets from 2% to 6.99% (Conn. Gen. Stat. 12-700), applied to Connecticut adjusted gross income, which starts from your federal AGI.
Benefit recapture — at higher incomes Connecticut phases out the benefit of its lower brackets, so the marginal rate effectively flattens toward the top.
Net rental income flows through to your Connecticut return from federal Schedule E, so an accurate federal return is the foundation for an accurate state return.

3. Capital Gains Taxed as Ordinary Income

Connecticut taxes capital gains as ordinary income — there is no preferential long-term rate at the state level. When you sell a rental, the entire gain is added to your other income and taxed on the same 2%–6.99% schedule, so a high-income seller pays up to 6.99% in Connecticut on top of federal capital-gains tax and net investment income tax.

Because Connecticut gives no break for long-term gains, disposition planning matters more here than in states with a capital-gains deduction. Model the full state hit — including depreciation recapture — before you sell.

4. Bonus Depreciation Add-Back

Connecticut does not conform to federal bonus depreciation (§168(k)) and requires an add-back — you take the bonus deduction federally but add it back to Connecticut income, then recover it over the following years on a regular schedule. Keep a separate Connecticut depreciation basis so the federal and state numbers reconcile year to year.

5. Real Estate Conveyance Tax

Connecticut imposes a real estate conveyance tax with both a state and a municipal part, paid by the seller (grantor) at closing on Form OP-236 (Conn. Gen. Stat. 12-494):

State portion — 0.75% on the first $800,000 of price and 1.25% on the portion above $800,000 (residential dwellings; non-residential and unimproved land are taxed at 1.25% throughout).
Municipal portion — 0.25% of the price; certain eligible (“targeted”) municipalities may charge up to 0.5%.
No deed is recorded until the conveyance tax is paid, so it is collected at the closing table.

6. LLC Fees ($80 Annual Report)

A Connecticut LLC must file an annual report with the Secretary of State (online at business.ct.gov) and pay an $80 annual fee, due between January 1 and March 31 each year. There is no separate LLC-level income or franchise tax for a standard pass-through, but budget the $80 per LLC, every year, to stay in good standing.

7. Rent Control & Fair Rent Commissions

Connecticut has no statewide rent cap — there is no percentage limit on how much you may raise the rent. But it does require fair rent commissions: under Conn. Gen. Stat. 7-148b, every municipality with a population over 15,000 must establish a commission empowered to investigate complaints and reduce rents it finds “harsh and unconscionable.”

A fair rent commission is not rent control — it does not set a fixed ceiling. But a tenant can challenge a large increase before the local commission, which can order the increase rolled back, so document the basis for any sizable rent increase in covered towns.

8. Security Deposit Rules

Cap of two months’ rent, reduced to one month’s rent for any tenant aged 62 or older (Conn. Gen. Stat. 47a-21).
Return within 30 days of the tenancy ending, or 15 days after the tenant gives a written forwarding address, whichever is later — with a written itemized statement of any deductions.
Interest is required — you must pay the tenant interest on the deposit at the annually published rate, and hold deposits in an escrow account at a Connecticut financial institution.
Penalty: a landlord who wrongfully withholds a deposit is liable for twice the amount of the deposit.

9. How SheltrIQ Helps Connecticut Landlords

Connecticut taxes both rental income and gains at ordinary rates and decouples from federal depreciation — SheltrIQ keeps your numbers right:

Graduated income modeling — applies the 2%–6.99% schedule with Connecticut’s benefit-recapture and phase-out add-backs, not a flat estimate.
Disposition modeling — taxes the full gain as ordinary income (no state long-term break) and folds in depreciation recapture, so a Connecticut sale is projected at its true state rate.
Bonus-depreciation tracking — flags the Connecticut §168(k) add-back and keeps a separate Connecticut basis so federal and state reconcile.
AI Schedule E classification — sorts each expense to the right line so your Connecticut return starts from an accurate federal one.

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