Hot Report: A Guide to the State Income Tax

OLR Report 2011-R-0383 provides an overview of Connecticut's personal income tax, including the tax rates, exemptions, and credit amounts and thresholds in effect for the 2011 tax year (January 1 through December 31). It presents scenarios to illustrate how these tax features work.

The Connecticut income tax applies to full-time residents who meet specific income thresholds or conditions and part-time residents and non-residents with income derived from sources within the state. The starting point for calculating the tax is the amount of federal Adjusted Gross Income (AGI) on a taxpayer's federal tax return. Taxpayers make several additions or subtractions to federal AGI to determine the portion of their income subject to Connecticut's income tax. For some filers, this amount is further reduced by a personal exemption. Taxpayers then apply tax rates that depend on the amount of taxable income and vary by filing status. Taxpayers with CT AGI over certain thresholds are also subject to a (1) phase-out of the lowest tax bracket and (2) “benefit recapture” which eliminates the benefits they receive from having a portion of their taxable income taxed at lower marginal rates.

The amount of tax a person actually pays may be offset by credits, including personal, property, and earned income tax credits that phase out at higher income levels.

The report goes on to explain:

• Who must file?

• How is the tax calculated?

and then gives four different scenarios and shows how the income tax is calculated in each case.

Read the report for more information.