2024 Connecticut Tax Relief Measures Announced: Who Benefits?

Just days before the end of 2023, Governor Ned Lamont announced three tax cuts for the next year. Connecticut tax relief measures for 2024 include lowering income tax rates, increasing the Earned Income Tax Credit (EITC), and expanding senior citizen pension exemptions. These tax measures will take effect from January 1, 2024.

2024 Connecticut Tax Cut Measures: What Are They?

On Wednesday, Governor Lamont announced three significant tax relief measures that will take effect in early 2024. Connecticut’s 2024 tax relief measures include the largest income tax cut in state history, strengthened tax credits for low-income workers, and expanded exemptions for certain pension and annuity income for seniors.

In total, the three tax relief measures are estimated to reduce residents’ taxes by approximately $460.3 million. The 2024 Connecticut tax relief measures are a result of the fiscal year 2024-2025 state budget that lawmakers approved this summer.

Governor Lamont said in a press release: “These tax cuts are possible thanks to the fiscal discipline we have implemented over the past five years. “This stabilizes the state’s fiscal system and ends a years-long trend of deficits and uncertainty.” release

Connecticut’s revenue growth is expected to exceed growth in fixed costs over the next few years. For example, general fund revenues are projected to increase by $393.4 million in fiscal years 2025 to 2026, while fixed expenses are projected to increase by $254.6 million over the same period.

Details of tax reduction measures

The most significant of Connecticut’s 2024 tax relief measures is a lower income tax rate, which will benefit more than 1 million tax filers. This is the largest income tax cut in state history and the first rate reduction since the mid-1990s.

Connecticut follows a graduated income tax rate structure, and the new changes will reduce the two lowest tax rates.

• The 3% tax rate on the first $10,000 of income for single filers ($20,000 for joint filers) was reduced to 2%.
• The 5% tax rate on the next $40,000 of income for single filers ($80,000 for joint filers) has been reduced to 4.5%.

This tax relief is capped at $150,000 for single filers ($300,000 for joint filers).

Governor Lamont also increased the state’s Earned Income Tax Credit for low-income workers from 30.5% to 40% of the federal EITC. The change will provide about $44.6 million more in state tax credits to about 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 income. Specifically, the new changes eliminate the retirement income tax cliff “by adding a phase-out of the deduction for allowable pensions and annuities and IRA distributions on personal income taxes.”

Currently, approximately 200,000 filers benefit from the retiree exemption limit. It is estimated that an additional 100,000 filers will benefit from the new changes.