Pension Income

Residents of Connecticut Receiving Income from Pensions or Annuities:

  • Income tax applies to pensions received by residents of Connecticut - pension and annuity benefits received by Connecticut residents are subject to Connecticut income tax to the extent that these benefits are includable in federal adjusted gross income for federal income tax purposes.  Connecticut income tax applies even if the pension is paid by a former employer located in another state.
  • There is no exemption from state tax for retired state employees who are residents of Connecticut - Connecticut does not exempt from state income tax the pensions paid to retired employees of the state of Connecticut; therefore, it does not exempt from Connecticut income tax the pensions paid to residents of Connecticut who are retired employees of other states or the federal government.
  • Effective January 1, 2018, payers that maintain an office or transact business in CT and make payments of taxable pensions or annuity distributions to Connecticut residents, are required to withhold income tax from such distributions. Resident recipients need to file Form CT-W4P, Withholding Certificate for Pension or Annuity Payments, with their pension payer so that the correct amount of tax is withheld. If the form is not filed with the payer, the payer will withhold at a rate of 6.99%.

Nonresidents of Connecticut Receiving Pensions Paid by Former Connecticut Employers:

  • Pension and annuity benefits from federally qualified or nonqualified pension or retirement plans paid to nonresidents of Connecticut are not subject to Connecticut income tax.
  • Nonresidents who worked in Connecticut are subject to Connecticut income tax on Connecticut source income, including but not limited to back wages, unemployment compensation benefits, severance payments, accrued vacation and accrued sick pay.
  • Please refer to our regulations for information on the taxation of nonresidents with income from incentive stock options, nonqualified stock options, and nonqualified deferred compensation.