Our Dash of SALT Blog provides the most recent developments and changes in state and local tax regulations. Here are the latest updates for Connecticut.
May 25, 2026
Connecticut Enacts Broad Tax Reforms in 2026 Budget
Authored by: Bonnie Susmano, JD, MBA and Brian Meier, MSA
Connecticut’s newly enacted budget introduces a wide range of tax changes impacting income, sales and property taxes, along with several targeted incentives. The state continues to decouple from certain federal provisions (e.g., IRC Section 168(n)), including limitations on bonus depreciation rules and expensing rules. The law also creates a January 1, 2025, fixed-date conformity for IRC Section 174 regarding the treatment of research and experimental expenses. At the same time, Connecticut is expanding opportunities for taxpayers by creating new credits, including incentives for small businesses offering health reimbursement arrangements (up to $1,000 per covered employee), research and development credits for eligible pass-through entities and a future caregiver-related personal income tax credit (effective 2027).
Sales and use tax changes include an expansion of the back-to-school sales tax holiday by increasing the per-item exemption threshold from $100 to $300 per item, along with extensions and new targeted credits aimed at economic development, such as film and media credits usable against sales and use tax through 2028, and an arena facility operations sales tax credit capped at $2M annually.
Property tax provisions provide municipalities with additional flexibility, including potential exemptions for qualifying primary residences and development-related abatements, particularly for infrastructure projects such as airport expansion zones. As these changes introduce both compliance complexities and planning opportunities across multiple tax types, businesses and individuals should carefully assess their impact.
If you have questions about how state budget bills affect your business, please reach out to a member of the Withum SALT Team.
April 6, 2026
Connecticut Lawmakers Advance Broad Tax Relief Measures Under “Affordability” Proposal
Authored by: Brian Meier, MSA and Courtney Easterday, MSA
Connecticut legislators are moving forward with a wide‑ranging tax relief proposal to reduce the cost of everyday necessities for residents. Senate Bill 1, known as “An Act Concerning Affordability,” recently cleared the Joint Committee on Finance, Revenue and Bonding and proposes multiple sales and income tax changes beginning later this year. Key provisions include eliminating sales tax on most clothing and footwear priced under $100, certain school supplies, and qualifying energy‑efficient household appliances. Additional relief would extend to prepared foods sold by grocery stores for takeout, such as sandwiches and beverages, later in the year.
The bill also targets income tax relief, particularly for homeowners, vehicle owners, and retirees. It would raise the existing income tax credit for owning a Connecticut home or car and fully exempt Social Security benefits from state income tax, regardless of income level, removing current thresholds that phase in taxation at higher adjusted gross income levels. Supporters, including advocacy groups for older residents, have praised the proposal as a meaningful step toward easing financial pressure and helping retirees remain in their communities, while some lawmakers continue to weigh long‑term fiscal considerations.
If you have questions about state tax changes related to sales tax and personal income tax exemptions, please contact a member of the Withum SALT Team.
April 29, 2024
U.S. District Court Upholds IRS’ Limitation on Charitable Contribution SALT Workarounds
Authored by: Brandon Mejia and Courtney Easterday, MS
In response to the TCJA, several states proposed enacting charitable contribution funds where taxpayers could make a charitable contribution to the state and receive a tax credit in return. In response, the IRS released guidance stating that there is only a charitable contribution to the extent the contribution exceeded the credit received. New Jersey, New York, and Connecticut ultimately sued the IRS, arguing that the IRS’ ruling violated the Administrative Procedures Act. The U.S. District Court of the Southern District of New York determined the IRS’ limitations on charitable contribution workarounds for the SALT cap were reasonable. Furthermore, the Court held that the states did not have standing to sue as none of the litigants established charitable contribution workarounds, and therefore, none could show any injury.
February 12, 2024
Connecticut DRS Extends Filing and Payment Deadlines for Individual and Business Tax Returns
Authored by: Kiana McGowan, CPA, MBA and Jonathan Weinberg, JD, LLM, Principal
The Connecticut Department of Revenue Services is extending the filing and payment deadlines for certain individual and business tax returns to June 17, 2024. These extensions align with the IRS’ extended due dates for taxpayers affected by recent storms and flooding resulting in FEMA disaster designations in parts of the state. If a taxpayer was directly affected by the FEMA designation and is unable to file by the extended deadline, they may contact the DRS to seek relief from any penalties and interest.
Please see TSSB 2024-1 for a list of the impacted returns and payment deadlines.
If you have questions about state disaster relief provisions, please reach out to a member of the Withum SALT Team.
Have Questions or Need Guidance?
For more information on this topic, please contact a member of our team.