Connecticut’s Governor Ned Lamont recently announced a series of substantial tax relief measures set to come into effect in 2024, marking a significant financial boon for the state’s residents.
These measures, embedded in the fiscal year 2024-2025 state budget, are poised to deliver the most substantial income tax reduction in Connecticut’s history, augment low-income worker tax credits, and expand exemptions for pension and annuity earnings, particularly supporting the elderly populace.
The tax relief initiatives, a result of the Connecticut General Assembly’s approval and Governor Lamont’s endorsement, are expected to reduce state taxpayers’ burdens by an estimated $460.3 million, providing substantial financial respite.
Commencing January 1, 2024, Connecticut will witness a groundbreaking reduction in income tax rates, constituting the first reduction since the mid-1990s. This historic cut, primarily favoring middle-class taxpayers, entails significant changes:
- The 3% rate on the initial $10,000 earned by single filers and the first $20,000 by joint filers will diminish to 2%.
- The 5% rate on subsequent $40,000 earned by single filers and the next $80,000 by joint filers will decrease to 4.5%. This reduction, capped at $150,000 for single filers and $300,000 for joint filers, is anticipated to benefit over a million tax filers, substantially alleviating the financial strain on Connecticut residents.
Additionally, the Earned Income Tax Credit (EITC) for low-income workers has been substantially bolstered, making it one of the most generous in the nation. Retroactively effective for 2023, this enhancement elevates the state EITC from 30.5% to 40% of the federal EITC, translating to an extra $44.6 million in state tax credits for approximately 211,000 eligible low-income filers.
Further, the state is expanding deductions for IRA distributions and retirement income, significantly aiding seniors. The budget introduces a phase-out mechanism against personal income tax, eliminating the retirement income tax cliff. This alteration is set to benefit around 200,000 existing filers, with an additional 100,000 poised to benefit from the retirement cliff’s elimination through the exemption phase-out.
Connecticut’s emphasis on financial relief for middle-income earners, low-income families, and seniors underscores the state’s commitment to supporting its residents. The state’s prudent fiscal management has paved the way for these historic tax reductions, ensuring a more secure financial future for many Connecticut households.
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