Here’s how much you might save under Connecticut’s income tax cut

The largest — and first — cut in the state income tax could mean as much as nearly $600 in savings for state residents.

For starters, anywhere from $120 to $590 in the 2024 tax year, depending on your earnings and filing status — and assuming you take the full allotment of Connecticut’s property tax credit for your home and vehicles in both years, which tops out at $300.

The General Assembly was poised to give final approval to the state budget Tuesday night and Gov. Ned Lamont is expected to quickly sign the $51 billion budget that includes the tax cut.

“Don’t tell me that doesn’t make a difference,” Lamont said Tuesday afternoon during a Hartford press conference. “It sends a message — this is a state that every four years was raising taxes like clockwork.”

Small businesses would see identical savings for proprietors that use individual tax forms to report their business income, though Lamont did not get a a tax cut he had sought for “pass-through” business entities like limited liability companies and partnerships.

What are the savings?

According to tables released Monday by the governor’s office, the savings kick in at $120 for single filers making $30,500 in annual adjusted gross income, whose state income tax bill would be reduced by nearly half. An individual making $125,500 would still see a 1.8% savings on their Connecticut income taxes under the legislation.

Those making between $50,500 and $110,500 would see savings between $200 and $290, with double-digit percentage savings for those making $60,500 or less.

The savings range between $400 and nearly $600 for joint filers making combined income between $70,500 and $225,000.

Under Connecticut’s current tax code, individuals pay a 3% tax on their first $10,000 in income, then 5% for additional amounts up to $50,000, with higher marginal taxes applying after that. The law would lower the base income tax to 2% on that first $10,000, and the marginal tax rate to 4.5% on additional amounts through $50,000.

The marginal tax for the current 5% tax bracket kicks in for married couples at $40,000 in earnings through $100,000; and for people filing as heads of household, the marginal 5% tax bracket takes effect at $16,000 in income up through $80,000.

The Lamont administration says about one million tax filers — or six of every 10 — will qualify for reduced income taxes, and that 82% of the benefits will go to filers who make less than $150,000.

Earned Income Tax Credit

On Tuesday, Lamont credited state Sen. Martin Looney, D-11, in advocating for an increase in Connecticut’s Earned Income Tax Credit, saying it is now among the highest in the nation. Last month, Lamont called the EITC “one of the best anti-poverty tools” because parents must have income from jobs in order to qualify.

The budget proposal increases the Earned Income Tax Credit to 40% from 30.5% previously, which will benefit roughly 211,00 tax filers according to the governor’s office. That would bring Connecticut in line with New Jersey for the second highest in the nation after Maryland’s 45%, not including California which has an adjusting rate based on income. New York and Massachusetts both have 30% Earned Income Tax Credits.

To qualify for the Earned Income Tax Credit, parents with three qualifying children cannot have more than $53,057 in income, or $59,187 for married couples filing jointly. For a parent with two children, the limit is $49,399, or $55,529 for those filing jointly. The EITC income ceiling drops to $49,622 for those with one qualifying child.

Individuals can qualify as well with no children, but with a very low limit of qualifying income at $16,480 for an individual or $22,610 for married people filing jointly. The state estimates Earned Income Tax Credits ranging from about $460 to just over $2,000, depending on parents’ filing status.

Pension tax relief

The bill eliminates a “cliff” that has been hitting income taxes on pensions, annuities and individual retirement account distributions. Under current law, retirees who report more than $75,000 in taxable income lose an exemption on taxes, or $100,000 in instances of married couples filing jointly.

The budget bill would create brackets that would gradually ramp up taxes on income beyond those thresholds — up to $100,000 before individual filers would see their pension income taxed fully, or $150,000 for married couples.

“That will be a significant tax cut for seniors,” Lamont said. “Florida’s a great place — you may like the sunshine in January, but you don’t have for tax relief because we are very competitive on those fronts right now.”