Just days before the end of 2023, Gov. Ned Lamont has announced three tax relief measures for next year. The 2024 Connecticut tax relief measures include a drop in income tax rates, an increase in Earned Income Tax Credits (EITC) and an expansion of senior pension exemptions. These tax measures will take effect on Jan. 1, 2024.
2024 Connecticut tax relief measures: what are they?
On Wednesday, Gov. Lamont announced three significant tax relief measures that will take effect at the start of 2024. The 2024 Connecticut tax relief measures include the largest income tax reduction in the state’s history, a boost in tax credit targeting lowest-income workers, and an expansion of exemptions on certain pension and annuity earnings for seniors.
In all, the three tax relief measures are estimated to reduce taxes for residents by about $460.3 million. The 2024 Connecticut tax relief measures are the result of the fiscal year 2024-2025 state budget that lawmakers approved this summer.
“These tax cuts are possible due to the fiscal discipline that we’ve implemented over the last five years, which has stabilized the state’s fiscal house and ended a trend of too many years of deficits and uncertainty,” Gov. Lamont said in a press release.
Connecticut’s revenue growth is expected to exceed growth in fixed costs for the next several years. For instance, the General Fund revenue is estimated to go up by $393.4 million from fiscal year 2025 to 2026, while fixed costs for the same period are expected to go up by $254.6 million.
Details of tax relief measures
As for the 2024 Connecticut tax relief measures, the chief among the three is the reduction in income tax rates, which will benefit more than one million tax filers. It is the largest income tax cut enacted in state history and the first time the rates have been reduced since the mid-1990s.
Connecticut follows a progressive income tax rate structure, and the new changes will reduce the two lowest rates.
- The 3% rate on the first $10,000 earned by single filers ($20,000 by joint filers) has been reduced to 2%.
- The 5% rate on the next $40,000 earned by single filers ($80,000 by joint filers) has been reduced to 4.5%.
This tax relief is capped at $150,000 for single filers ($300,000 for joint filers).
Gov. Lamont also increased the state’s Earned Income Tax Credit for low-income workers from 30.5% to 40% of the federal EITC. This change will provide about $44.6 million more in state tax credits to around 211,000 low-income filers.
The 2024 Connecticut tax relief measures also expand the state’s existing deductions for certain IRA distributions and pension and annuity earnings. Specifically, the new change eliminates the retirement income tax cliff “by adding a phase-out for allowable pension and annuity and IRA distribution deductions against the personal income tax.”
About 200,000 filers currently benefit from the retiree exemption limits. It is estimated that an additional 100,000 filers could benefit from the new change.
