According to the news released by Kiplinger, Connecticut Tax Relief Bill was signed into law by Connecticut Governor Ned Lamont. The bill will mainly benefit middle-class and lower-income families. Taxpayers will be able to save up to $640 million in a year.
In the Connecticut Biennium Budget Fiscal Year 2024-2025, they have included in its budget the largest cut in history. The huge tax cut could benefit millions of Connecticut taxpayers mostly middle- and lower-income families. A total of two state income tax cuts will be implemented. First is the reduction of Income Tax Rates and second is the implementation of Earned Income Tax Credit (EIC).
The Tax Rate Cuts and Earned Income Tax Credit
New Tax rates shall be implemented upon the approval of the bill. The new rates are as follows:
- Eligible single fillers first 10,000 of taxable income at a 2% rate.
- Eligible single fillers next $40,000 of taxable income at a 4.5% rate.
- Eligible joint filler first 20,000 of taxable income at a 2% rate.
- Eligible joint filler next $80,000 taxable income at a 4.5% rate.
- Eligible head of household first $16,000 of taxable income at a 2% rate.
- Eligible head of household next $64,000 taxable income at 4.5% rate.
In previous tax rates, all tax rates at 2% were previously 3%. And tax rates at 4.5% were previously 5%. Taxpayers will pay less state income taxes next year.
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Increase of Earned Income Tax Credit
While the Income Tax Credit will also increase from 30.5% will increase to 40%. As a reference, joint fillers or families with three or more qualifying children maximize their earned income tax credit in 2022 reaching $59,187. So this year, it will leap higher.
In addition, according to Gov. Lamont’s website, Connecticut’s EIC tax change is acknowledged as one of the top five states in the U.S. for the highest earned income credit amounts. The credits that you have earned can be used to actually get the credit as a tax refund. The revised EIC will take effect for the 2023 tax year. This means that residents can see the leap in their state tax refunds as they file state tax returns in the first quarter of 2024. However, individuals who claim as qualifying children are not eligible for Connecticut’s earned income credit.
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