A Connecticut tax relief package that includes tax benefits for the middle class and families with lower incomes was recently signed into law by Connecticut Gov. Ned Lamont. Some Connecticut taxpayers could see some benefits from the newly enacted budget as early as this year.
“Overall, through the tax cuts in this budget, we expect to save taxpayers more than $460 million a year,” Gov. Lamont said during the bill signing ceremony.”
Connecticut Income Tax Cuts
The Connecticut FY 2024-25 Biennium Budget includes a historically large state income tax cut. According to Gov. Lamont's office, the state’s income tax cuts are expected to benefit a million Connecticut taxpayers. Many of those are expected to be families with middle and lower incomes.
Two Connecticut state income tax rates will be reduced. (These reductions do not impact federal income tax rates, however).
The 3% current state income tax rate will be reduced to 2%, and the current rate of 5% will reduce to 4.5%. Single filers making up to $150,000 and joint filers making up to $300,000 could pay less state income taxes next year. The following new state income tax rates become effective in Connecticut for the 2024 tax year.
- Eligible single filers will pay 2% on the first $10,000 of taxable income.
- Eligible single filers will pay 4.5% on the next $40,000 of taxable income.
- Eligible joint filers will pay 2% on the first $20,000 of taxable income.
- Eligible joint filers will pay 4.5% on the next $80,000 of taxable income.
- Eligible head of household filers will pay 2% on the first $16,000 of taxable income.
- Eligible head of household filers will pay 4.5% on the next $64,000 of taxable income.
Connecticut Earned Income Tax Credit (EIC)
More than 200,000 Connecticut residents with middle to lower incomes (the maximum income limit to claim the state's earned income tax credit in 2022 was $59,187 for joint filers with three or more qualifying children) will benefit from the enhanced Connecticut earned income tax credit (EIC), according to the governor’s office. The current rate of 30.5% of the federal EIC will jump to 40%.
Also, according to information provided on Gov Lamont’s website, the state’s EIC tax change places Connecticut in the top five states in the U.S. for the highest earned income credit amounts. The credit is refundable, meaning that you could get the amount of the credit back as a tax refund rather than only reducing the amount of tax you would owe.
The EIC change goes into effect for the 2023 tax year, so eligible Connecticut residents could see a jump in their state tax refunds when they file state tax returns in early 2024. To qualify for the Connecticut EIC, taxpayers must be a Connecticut resident for the entire year, have a valid Social Security number, and meet income requirements. Additionally, individuals claimed as qualifying children cannot claim Connecticut’s earned income credit.
Other Benefits in the Connecticut Budget
The Connecticut budget provides some other potential benefits for Connecticut residents. For example:
- $2 million for low-income housing subsidies and housing support to combat homelessness.
- $5 million in housing vouchers for communities at risk of gun violence.
Eligible graduates could also see student loan reimbursements. Connecticut has allowed $6 million in student loan reimbursements for eligible residents.
