by Patricia M. McDermott, Esq.
Connecticut Governor Ned Lamont has announced that three income tax measures will take effect at the start of 2024, including reduced income tax rates, increased Earned Income Tax Credits (EITC), and expanded senior pension exemptions. (Press Release, Office of Governor Ned Lamont, 12/20/2023.)
Income tax cuts. Beginning on January 1, 2024, a reduction in Connecticut’s income tax rates will take effect. Connecticut has a progressive income tax rate structure, meaning that the tax rate increases with income at varying rates as income grows in each bracket. The enacted changes provide for a decrease in the two lowest rates:
- The 3% rate on the first $10,000 earned by single filers and the first $20,000 by joint filers will drop to 2%.
- The 5% rate on the next $40,000 earned by single filers and the next $80,000 by joint filers will drop to 4.5%.
The relief is capped at $150,000 for single filers and $300,000 for joint filers.
Earned income tax credit. The Connecticut EITC is a refundable state income tax credit for working individuals and families with the lowest incomes that mirrors the federal EITC. Connecticut’s EITC is increasing from 30.5% to 40% of the federal EITC. The change, which took effect retroactively for 2023, will be available when recipients file their personal income tax returns in 2024.
Pension and annuity earnings for seniors. Also effective in 2024 is an expansion of the state’s existing deductions for certain IRA distributions and pension and annuity earnings to benefit seniors. Specifically, the state budget eliminated the retirement income tax cliff by adding a phase-out for allowable pension and annuity and IRA distribution deductions against the personal income tax.
