Here’s a quick summary of the tax code updates that may affect your 2020 Connecticut tax return.
New for 2020
Income Tax Exemption for Teachers’ Pensions
For 2020, a taxpayer is allowed a subtraction modification of 25% of the income received from the Teachers’ Retirement System when calculating CT AGI, to the extent such income has been included in federal AGI for the taxable year. This was scheduled to increase to 50% on June 26, 2019 but was postponed until 2021.
Subtraction Modification of Pension and Annuity Income
The six-year phaseout of CT income tax on pension and annuity incomes below a certain threshold began in 2019. For 2020, an individual with a federal filing status of single, married filing separately or head of household, with federal AGI for the taxable year of less than $75,000, or married filing jointly with federal AGI of less than $100,000 will be allowed to subtract 28% of any pension or annuity income received for the taxable year when calculating Connecticut AGI. This subtraction modification only applies to the extent that the pension or annuity income has already been properly included in federal AGI. The exemption will rise to 42% for the 2021 tax year.
Taxpayers may not claim the 25% Teachers’ Retirement System income subtraction modification and the 28% pension and annuity income subtraction modification for the same income. However, if a taxpayer filing an individual return or a joint return has income from the Teachers’ Retirement System and income from a pension or annuity that qualifies for the pension or annuity subtraction modification, then the taxpayer may claim both modifications.
Pass-Through Entity Tax Modified
Retroactively beginning January 1, 2019, the pass-through entity tax credit percentage decreased from 2018’s level of 93.01%. An owner of a pass-through entity is now entitled to a credit equal to 87.5% of their share of the entity’s tax liability.
Business Entity Tax
The $250 biannual business entity tax was eliminated beginning on January 1, 2020.
New for 2021
New Family and Medical Leave Payroll Tax
CT employees will notice a new payroll tax on their January paychecks. The new tax withholding began January 1, 2021 and will fund CT’s Paid Family and Medical Leave program. Employees will have 0.5% of their wages withheld up to the federal Social Security wage maximum, which is $142,800 for 2021. Benefits for the new program start in 2022. See the new Paid Leave Authority page for more information on available benefits and qualifications.
Need a Copy of Your Previous Return?
You can obtain a copy of your past CT individual and business tax returns for free using the CT Taxpayer Service Center.
Schedule early. Our calendar fills up fast as people begin to receive their W-2s. Take the stress out of filing by calling us as soon as you have your documents together. Leave yourself time before the April 15th deadline to catch and sort out any issues that arise. By filing earlier, you get your refund faster or have more time to pay what you owe and help protect any refund from identity thieves.