Connecticut may be small, but it’s home to a thriving business environment. In addition to countless state-run business funding programs, Connecticut also has a wide variety of state tax incentives available to businesses of all sizes and industries.
Read on to see which incentive programs you can qualify for.
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Connecticut tax incentives for businesses
Accumulated R&D Tax Credit Expansion Program
The Accumulated R&D Tax Credit Expansion Program lets businesses consolidate their unused research and development (R&D) tax credits to invest in an expansion project. In order to qualify, your business needs to meet the below criteria:
- Be located in Connecticut
- Employ more than ten people
- Have over $500,000 worth of Connecticut R&D tax credits on your balance sheet—without the ability to use them in the next two years
- Submit a plan for business expansion or innovation to the Connecticut Department of Economic and Community Development that demonstrates how your business will either generate at least 50 new jobs in Connecticut or require more than $5 million in capital expenditures
Learn more about how to apply here.
Angel Investor Tax Credit
The Angel Investor Tax Credit is a state income tax for investors who invest between $25,000 and $2 million in qualifying Connecticut businesses. The credit amount is equal to 25% of the capital investment, up to $500,000.
In order to become a qualified Connecticut business, a business has to meet these criteria:
- Have gross revenues of less than $1 million in the most recent income year
- Have fewer than 25 employees (including shareholders, members, or active partners), at least 75% of whom are Connecticut residents
- Have operated in Connecticut for fewer than seven consecutive years
- Have received less than $2 million in eligible investments from angel investors
Learn how to apply for the credit here.
Digital Animation Production Company Tax Credit
With the Digital Animation Production Company Tax Credit, digital animation production companies can apply for a tax credit to offset their production-related spending in Connecticut. Qualified companies can get a credit ranging from 10% to 30% of their qualified expenses or costs in Connecticut.
To be eligible to apply, a production company needs to maintain studio facilities in Connecticut and employ at least 200 full-time employees in the state.
Learn how to apply for the credit here.
Digital Media & Motion Picture Tax Credit
Similar to the digital animation production company credit, the Digital Media & Motion Picture Tax Credit incentivizes eligible production companies to produce a variety of entertainment content in Connecticut.
If a production company spends at least $100,000 on qualified production expenses and costs in Connecticut, they can get a credit equal to 10% of their spending; if they spend $1 million or more, their credit amount jumps to 30%.
To be considered an eligible production company, you must meet the below criteria:
- Conduct at least 50% of principal photography days within Connecticut
- Expend at least 50% of postproduction costs within Connecticut or expend $1 million or more in postproduction costs in Connecticut
Learn more about how to apply here.
Film Infrastructure Tax Credit
The Film Infrastructure Tax Credit incentivizes individuals and companies to invest in state-certified entertainment infrastructure projects. Taxpayers who invest $3 million toward providing basic buildings, facilities, and installations for digital media and motion picture companies can get a tax credit equal to 20% of their contribution.
Learn how to apply here.
Insurance Reinvestment Tax Credit
The Insurance Reinvestment Tax Credit is designed for insurance companies that invest capital with approved fund managers who support growing Connecticut businesses. If you qualify, you can get a 100% tax credit on your insurance premiums.
Find more information on the program here.
Urban/Industrial Sites Reinvestment Tax Credit
With the Urban/Industrial Sites Reinvestment Tax Credit, companies can get a corporate income tax credit for investing in urban and industrial site revitalization projects within Connecticut. The credit amount is equal to 100% of your investment, up to $100 million.
The minimum investment is $5 million for a distressed community, $2 million for a historic preservation facility, and $50 million in all other communities.
Learn what qualifies as an urban and industrial site—plus find details on applying—here.
Enterprise Zone Program Property Tax Abatement
Under Connecticut’s Enterprise Zone Program, certain companies can get a five-year local property tax abatement for developing or improving a property located in an Enterprise Zone. Enterprise Zones are typically areas that have a poverty rate of at least 25% and an unemployment rate two times the state average.
To be eligible for the abatement, you need to meet one of the following requirements:
- Renovate an existing facility in an Enterprise Zone by investing at least 50% of the facility’s prior assessed value in the renovation
- Construct a new facility or expand an existing facility in an Enterprise Zone
- Acquire a facility that has been idle for a stated minimum timeframe: for 19+ employees, at least one year; for 6-19 employees, at least six months; for 5 or fewer employees, no idleness requirement
If you qualify, you can get a five-year 80% abatement of local property taxes on qualifying real estate and personal property (like machinery and equipment).
Find out how to apply here.
Airport Development Zone Property Tax Abatement
The Airport Development Zone Program is similar to the Enterprise Zone Program. However, under the Airport Development Zone Program, companies get a tax abatement for investing in improving properties located within three approved airport zones: Bradley International Airport (BDL), Groton-New London Airport (KGON), and Waterbury-Oxford Airport (KOXC).
To be eligible for the abatement, companies need to meet one of the following requirements:
- Renovate an existing facility in an Airport Development Zone by investing at least 50% of the facility’s pre-acquisition value in the renovation
- Construct a new facility or expand an existing facility in an Airport Development Zone
- Acquire a facility that has been idle in an Airport Development Zone for a stated minimum timeframe
Companies that engage with any of the below activities can apply for the abatement:
- Manufacturing, processing, or assembly of raw materials or parts
- Manufacturing-related research and development
- Service, overhaul, or rebuilding of industrial machinery and equipment
- Warehouse and transport freight (as long as the business is dependent on goods shipped by air)
- Business services, including information technology services, directly related to airport operations
If you qualify, you can get a five-year 80% abatement of local property taxes on qualifying real estate and personal property (like machinery and equipment).
Find out how to apply here.
CT Historic Rehabilitation Tax Credit Program
Under Connecticut’s Historic Rehabilitation Tax Credit Program, businesses can get an income tax credit for rehabilitating Certified Historic Structures within the state. The credit amount is equal to 25% of the cost of qualified rehabilitation expenditures.
To qualify for the program, your project needs to meet these criteria:
- The structure must be rehabilitated in a manner consistent with the historic character of such property and be rehabilitated for 1) residences of five units or more; 2) mixed residential and nonresidential use; or 3) nonresidential use.
- The expenses must be hard costs associated with the rehabilitation, not site improvements or non-construction costs.
Find out how to apply for the program here.
Machinery and Equipment Expenditure Tax Credit
Connecticut companies with 800 or fewer full-time permanent employees in Connecticut can take advantage of the Machinery and Equipment Expenditure Tax Credit.
The credit amount is between 5% and 10% of the amount spent on machinery and equipment costs in the previous year. A company is eligible for 5% if they have more than 250 employees and 10% if they have fewer than 250 employees.
Learn how to claim the credit here.
Workforce Housing Opportunity Development Tax Credit
The Workforce Housing Opportunity Development Tax Credit credits businesses that make cash contributions to eligible housing developers who are working on housing development projects in designated Opportunity Zones.
Learn how to apply here.
Housing Program Contribution Tax Credit
The Housing Program Contribution Tax Credit rewards businesses for making cash contributions to housing programs or workforce housing development projects that benefit low and moderate-income individuals and families in the state.
The credit amount is equal to 100% of a business’s cash contribution. Learn how to claim the credit here.
ABLE Account Contributions Tax Credit
Connecticut businesses can get a tax credit for contributing to their employees’ ABLE (Achieving a Better Life Experience) accounts. ABLE accounts are used to pay the qualified disability expenses related to the disability of a designated beneficiary.
The credit amount is 100% of the contribution made. You can apply for the credit here.
Do you employ someone who has a disability? Make sure you know what reasonable accommodations you need to provide.
Human Capital Investment Tax Credit
The Human Capital Investment Tax Credit is designed to incentivize businesses to invest in their employees’ personal well-being and professional development, as well as contribute to state-run education programs.
Businesses can get a credit between 5% and 25% of the amount incurred for their human capital investment, depending on when they apply and what the investment is going toward.
Eligible investments include:
- In-state job training
- Work education programs in Connecticut
- Worker training and education from a Connecticut higher institution of education
- Donations or capital contributions to institutions of higher education in Connecticut for improvements or advancement of technology
- Planning, site preparation, construction, renovation, or acquisition of facilities in Connecticut for the purpose of establishing a child care center to be used primarily by the children of employees who are employed in Connecticut
- Child care subsidies paid to employees employed in Connecticut for child care provided in Connecticut
- Contributions made to the Individual Development Account Reserve Fund administered by the Connecticut Department of Labor
Learn more about the credit here.
Apprenticeship Training Tax Credit in Manufacturing, Plastics, Plastics-Related, or Construction Trades
Connecticut’s Apprenticeship Training Tax Credit credits employers for hiring apprentices in the manufacturing, plastics, plastics-related, or construction trades. To be eligible for the credit, employers need to make sure they:
- Hire the apprentice for at least 4,000 hours (two years) but not more than 8,000 hours (four years) and
- Employ each apprentice on a full-time basis or a minimum of 120 hours per month
The credit amount varies depending on the trade your business is in, but it ranges from $4,000 to $7,500.
Learn more about the credit here.
Related: Learn what it takes to hire an intern legally.
Research and Experimental (Incremental) Expenditures Tax Credit
Certain Connecticut companies can get a tax credit to offset the incremental increase in their research and experimental expenditures conducted in the state. Research and experimental expenditures can include:
- Research and development costs
- Costs related to developing or improving a product
- Costs involved with obtaining a patent
The credit amount is equal to the increase in expenditures from the previous year to the current year, multiplied by 20%. Find out how to claim the tax credit here.
Research and Development Expenses Tax Credit
Similar to the federal research and development (R&D) tax credit, Connecticut’s research and development tax credit gives a corporate income tax credit to businesses that engage in certain R&D activities.
If you spend under $50 million on R&D expenses, you can get a credit equal to 1% of your qualified R&D costs. To qualify, your gross income from the previous year can’t be more than $100 million.
Learn more about the credit—including how to calculate your exact credit amount—here.
Donation of Land Tax Credit
If your business donates land for educational use or open space purposes, you can qualify for the Donation of Land Tax Credit. The credit amount is equal to 50% of the fair market value of the donated land.
Learn more about the credit here.
Electronic Data Processing Equipment Property Tax Credit
The Electronic Data Processing Equipment Property Tax Credit is available to businesses that pay personal property tax on electronic data processing (EDP) equipment during any income year. EDP equipment includes computers, printers, software, and other similar tools.
The credit amount is 100% of the personal property tax paid on EDP. Find out how to claim the credit here.
Neighborhood Assistance Act Program Tax Credit
The Neighborhood Assistance Act Program Tax Credit credits businesses for making cash contributions of at least $250 to select community programs.
Businesses can get credits equal to:
- 100% of their investment in energy conservation projects and college loan forgiveness programs
- 60% of their investment in programs that provide community-based alcoholism prevention or treatment; neighborhood assistance; job training; education; community service; crime prevention; construction or rehabilitation of dwelling units for families of low and moderate-income in the state; funding for open space acquisitions; investment in child day care facilities; child care services; and any other program that serves people operating at an income level below 150% of the poverty level for the preceding year
Learn how to apply here.
Scholarship Contributions Tax Credit
Under the Scholarship Contributions program—which is available through 2025—businesses can get tax credits for donating to certain nonprofit scholarship-funding organizations within Connecticut. These organizations help send income-qualified elementary students to private schools.
The credit amount is equal to 50% of the donation amount. Apply here.
Student Loan Payment Tax Credit
The Student Loan Payment Tax Credit is available to employers who make a payment directly to the Connecticut Higher Education Supplemental Loan Authority (CHESLA) for an education loan on behalf of their employee.
Qualified employees need to work full-time, be a resident of Connecticut, and have earned their bachelor’s degree from a Connecticut institution in the previous five years.
The credit amount is equal to 50% of the employer’s loan payment amount. Learn how to claim the credit here.
Business tax exemptions in Connecticut
In addition to tax credits, Connecticut also has a variety of tax exemptions for different types of companies. Here are some worth noting:
- Corporate Business Tax Exemption: Certain corporations in Connecticut—including insurance companies and certain banks in Hartford—are eligible for an exemption on their corporate business tax.
- Film/TV/Digital Media Tax Exemptions: Film, video, and broadcast production companies in Connecticut can get hotel tax exemptions and sales tax exemptions for certain materials and equipment purchased.
- Manufacturing and Biotech Sales and Use Tax Exemption: Manufacturing and bioscience companies in Connecticut can get 50-100% sales tax exemptions for purchasing certain machinery, equipment, tools, and materials.
- Manufacturing Machinery and Equipment Tax Exemption: Manufacturing and bioscience companies in Connecticut can get a 100% property tax exemption for eligible machinery and equipment installed in a manufacturing or biotechnology facility.
- Real and Personal Property Tax Exemptions: A wide variety of Connecticut businesses can get up to 100% tax exemptions for inventory, machinery and equipment, software, and commercial motor vehicles.
- Sales and Use Tax Exemption: Connecticut businesses can get sales and use tax exemptions on tangible personal property used in qualifying retention and business expansion projects.
Connecticut city and county tax credits
Some Connecticut cities have their own business tax incentive programs. Review this list to find your city’s website and browse around.
Financing resources for small businesses in Connecticut
Whether you want short-term financing for a special business project or need a long-term loan to buy additional real estate, Connecticut’s many state-funded programs can help. If you’re not sure where to start, visit Gusto’s guide to Connecticut business grants and loans.
Plus, bookmark these helpful posts on running a business in Connecticut:
