Updated October 5, 2026. Quick answer: Yes. Connecticut starts from federal adjusted gross income (“Enter your federal adjusted gross income from your 2025” return), so interest and dividends are taxed on graduated rates that run for 2025 from 2.00% to 6.99%. Interest on other states’ bonds is added back, and U.S. government obligation interest is subtracted.
How Connecticut treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Taxed on the graduated schedule |
| 2025 rates (single) | 2.00% up to $10,000, then “$200 plus 4.5% of the excess over $10,000”, rising to “$31,250 plus 6.99% of the excess over $500,000” |
| Other states’ bonds | Interest on state and local bonds is added back, with the booklet’s carve-out “(other than obligations of the State of Connecticut or its municipalities)” |
| U.S. obligations | Subtract “U.S. government obligations, which federal law prohibits states from taxing” |
| Fannie Mae, Ginnie Mae and Freddie Mac | “this interest income is taxable for Connecticut income tax purposes.” |
| Added back by statute | Section 12-701 adds “interest or dividend income on obligations or securities of any authority” that federal law exempts from federal but not state tax |
A $20,000 example
Taxable dividends and interest of $20,000 taxed wholly at the lowest 2025 rate, 2.00%, would add $400; higher brackets apply as income rises, up to 6.99%. Your own figure depends on your total income.
What changes in 2026
The latest documents read print no 2026 change to the way dividends and interest are taxed.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether Connecticut taxes capital gains, whether Connecticut taxes pensions, how Connecticut taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- 2025 Form CT-1040 Connecticut Resident Income Tax Return Instructions (Rev. 12/25): https://portal.ct.gov/-/media/drs/forms/2025/income/2025-ct-1040-instructions_1225.pdf
- Connecticut General Statutes Chapter 229, Income Tax (Secs. 12-700, 12-701): https://www.cga.ct.gov/current/pub/chap_229.htm
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.