Tax credit

Tax credits are designed to put more money in a taxpayer's pocket.

(The Center Square) – Nearly 200,000 households in Connecticut will benefit from an increase in the state's Earned Income Tax Credit, Gov. Ned Lamont said.

The governor said in a news release that the Department of Revenue Services will increase the 2020 Earned Income Tax Credit from 23% to 41.5% as directed by the state budget.

Lamont said the increase will “provide needed economic support to low-to-moderate income working individuals and families” who faced negative economic impacts amid the COVID-19 pandemic.

“Enhancing the 2020 Connecticut Earned Income Tax Credit provides direct relief to workers doing their best to provide for their families while confronting pandemic-related costs from masks and tests to childcare and internet access,” Lamont said in the release. “The recent bipartisan budget increased this credit going forward because numerous studies show it’s one of the best anti-poverty tools we have. The EITC encourages work, boosts economic stability, and uplifts generations to come.

“Ultimately, these tax credits improve entire communities because these dollars are being invested right back into our local economy.”

According to the release, the increase in the tax credit percentage will benefit 198,708 households that earned up to $56,844 in 2020. Under the credit, a single parent of two children at the federal poverty level received a $1,246 state tax credit. They will now receive an additional $1,002 for a total state tax credit of $2,248. The amount of the credit is determined by income, marital status, and number of qualifying children.

The cost of the enhanced credit, according to the release, is $75 million and is covered by the final portion of the state’s $1.38 billion Coronavirus Relief Fund, which was formulated through the CARES Act. CARES Act funds have previously been used to purchase personal protective equipment, expand access to COVID-19 testing, and support small schools, small businesses, nonprofits, nursing homes, hospitals, renters and more.

“Our hard work, strong fiscal stewardship, and oversight of these dollars has paid off, allowing us to leverage remaining Coronavirus Relief Funds to put more money in the pockets of those who have been deeply impacted by the pandemic and could really use our support,” Melissa McCaw, secretary of the Office of Policy and Management, said.

According to the release, the credit “will provide additional support for the children lifted out of poverty” from the 2021 federal Child Tax Credit, which runs out this week. The Department of Revenue Services will distribute checks for the additional credit by the end of February to eligible households.

The enhanced rate, according to the release, was raised to 30.5% under the FY2022-23 state budget, which was signed into law in June. The rate increase to 41.5% puts the state at a higher rate than neighboring Massachusetts and New York, which feature rates of 30%.

Associate Editor

Brent Addleman is an Associate Editor and a veteran journalist with more than 25 years of experience. He has served as editor of newspapers in Pennsylvania and Texas, and has also worked at newspapers in Delaware, Maryland, New York, and Kentucky.