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Connecticut
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Details:
• Form CT-1040EZ: All resident taxpayers must use Form CT-1040 to file their Connecticut income tax return. Form CT-1040EZ, Connecticut Resident EZ Income Tax Return has been eliminated.
• Income Tax Rates: New legislation increases income taxes for those with taxable incomes over $1 million for joint filers, $800,000 for head of household filers, and $500,000 for single filers and married people filing separately. It adds a third, higher income tax bracket and increases the marginal tax rate from 5.0% to 6.5% for income in that bracket. It also increases the flat income tax rate for trusts and estates from 5.0% to 6.5%.
• Personal Exemption and Credits: The annual increase to the personal exemption and credits used in calculating the tax for individuals whose filing status is single has been delayed by three years. The personal exemptions and credits for the 2008 taxable year remain in effect for the 2009 taxable year. The scheduled increases will resume beginning with the 2012 taxable year.
• Property Tax Credit Limitation: The annual increase to the property tax credit limitation thresholds for individuals whose filing status is single has been delayed three years. The property tax credit limitation amounts in effect for the 2008 taxable year remain in effect for the 2009 taxable year. The scheduled increases will resume beginning with the 2012 taxable year.
• Cancellation of Debt Income: Section 1231 of the American Recovery and Reinvestment Act of 2009 allows a taxpayer, at the taxpayer’s election, to defer the inclusion in federal gross income of cancellation of debt income realized in connection with a reacquisition of an applicable debt instrument after December 31, 2008, and before January 1, 2011. The cancellation of debt income, if the deferral election is made, must be included in federal gross income ratably over a period of five taxable years beginning in 2014.
• This addition modification must be made on Schedule 1, Line 33, of Form CT-1040 and on Line 35 of Form CT-1040NR/PY for taxable years beginning January 1, 2009. For taxable years ending after December 31, 2008, in computing Connecticut adjusted gross income, a taxpayer making the federal deferral election must add back to his or her federal adjusted gross income the amount of cancellation of debt income deferred for federal income tax purposes. Where a taxpayer made the federal election to defer cancellation of debt income and reported the amount as an addition modification on his or her Connecticut income tax return, and where the taxpayer is required to include those amounts ratably over the five year period beginning in 2014, the taxpayer will be allowed, in computing his or her Connecticut adjusted gross income, to subtract the ratable amounts from his or her federal adjusted gross income.
• This provision affects partnerships, limited liability companies treated as partnerships for federal income tax purposes, S corporations, and individuals conducting a trade or business. For more information on Section 1231 of the American Recovery and Reinvestment Act, visit the Internal Revenue Services website at www.irs.gov.
• Domestic Production Activities: For taxable years beginning on or after January 1, 2009, an individual is required, in computing his or her Connecticut adjusted gross income, to add back the deduction allowable under I.R.C. §199, to the extent the amount is deductible in determining federal adjusted gross income. This addition modification must be made on Schedule 1, Line 37, of Form CT-1040 and Line 39 of Form CT-1040NR/PY for taxable years beginning January 1, 2009.
• 50% of Military Retirement Pay: The subtraction modification for 50% of military retirement pay must be entered on Schedule 1, Line 45, of Form CT-1040 and Line 47 of Form CT-1040NR/PY for taxable years beginning January 1, 2009. This modification was entered on Line 49 for taxable year 2008.
• Economic Nexus: 2009 Conn. Pub. Act 09-3 (June Special Sess.) establishes economic nexus as the basis for determining whether nonresident partners or members of a partnership or S corporation are subject to Connecticut income tax on income derived from or connected with sources within the state. A partnership or S corporation has “substantial economic presence” in Connecticut if it purposefully directs business towards the state. Its purpose can be determined by such measures as the frequency, quantity, and systematic nature of its economic contact with the state.
• International ACH Transactions: New federal banking rules require the Department of Revenue Services (DRS) to request information about foreign bank accounts when the taxpayer requests the direct deposit of a refund into a bank account. If the refund is to be deposited in a bank outside the United States, DRS will issue a paper check.
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Government Link:
http://www.ct.gov/drs/cwp/view.asp?a=1451&q=447528
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