- Connecticut Earned Income Tax Credit increases from 23 percent of federal credit to 30.5 percent
- Qualifying households will receive an income boost ranging from $42 to $520
- Advocates for the higher credit say it will help lower income households with savings or with spending on essential items
Summary by Dirk Langeveld
Lower income households in Connecticut are set to receive a boost to their income following an increase to the state’s Earned Income Tax Credit. While the increase adds only a modest amount of spending power to qualifying residents, advocates say it will help families buy essentials, improve their savings, and support local businesses.
Governor Ned Lamont announced that the Connecticut Earned Income Tax Credit will increase from its current rate of 23 percent of the federal credit to 30.5 percent this year. Included as part of the 2022-2023 state budget, the state credit will deliver an additional $40 million to nearly 195,000 eligible households, for a total of $158 million.
Lamont said the increased credit will “provide direct relief to low-to-moderate income workers who are providing for their families” while also “improv[ing] entire communities because these dollars are being invested right back into our local economy through groceries, transportation, clothing, rent, utilities, and other necessary expenses.”
Senate President Martin M. Looney said the increase in the credit, combined with a gradual increase in Connecticut’s minimum wage, “are sending a clear message to working people in Connecticut that we are committed to making our state more affordable for you and your family.”
Eligibility
To qualify, filers must have eligible earned income and an adjusted gross income that is less than:
- $51,464 ($57,414 married filing jointly) with three or more qualifying children;
- $47,915 ($53,865 married filing jointly) with two qualifying children;
- $42,158 ($48,108 married filing jointly) with one qualifying child; or
- $15,980 ($21,920 married filing jointly) with no qualifying children
Eligible recipients get a tax refund when both the federal and state EITC exceed the amount of taxes owed. Households are eligible if they are employed, self-employed, or receive income through another source. They must meet certain other rules as well, such as being a Connecticut resident for the entire year.
Additional income
Under the previous federal EITC and 23 percent rate, the maximum amount a household could claim was:
- $538 for households with no children
- $824 for households with one qualifying child
- $1,362 for households with two qualifying children
- $1,532 for households with three or more qualifying children
Based on the new 30 percent Connecticut EITC and the 2021 federal EITC, households receiving the state credit stand to receive an additional $42 for households with no children, $269 for households with one qualifying child, $462 for households with two qualifying children, and $520 for households with three or more qualifying children.
The United Way of Connecticut says 38 percent of households in the state fall into its designation of Asset Limited, Income Constrained, Employed (ALICE). The organization says that while only 11 percent of households in the state are considered to be below the federal poverty level, this calculation excludes costs such as health and child care, transportation, and utilities.
ALICE households typically struggle to cover these key expenses even when their residents are employed. The EITC is regarded as a way to allow them to increase their savings or to spend on essential items such as food or rent.
EITC history
The Connecticut EITC started at 30 percent when it was first established in 2011. It has fluctuated in response to budget challenges, falling to 25 percent in 2013, increasing to 27.5 percent between 2014 and 2016, and dropping again to 23 percent between 2017 and 2020. The current rate is the first time the EITC has exceeded its initial level, and it currently stands slightly above the 30 percent rates in Massachusetts and New York.
The federal EITC was established in 1975. The measure was intended as both an incentive to work and as a way to offset Social Security taxes.
Earlier this year, some state legislators pushed for the state EITC to be increased to 40 percent of the federal EITC. About 175,000 households in Connecticut received a state credit in 2020.
