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December 29, 2021

CT retroactively boosts earned income tax credit for ‘20

Photo | CT Mirror The state Capitol.

Connecticut officials will retroactively enhance the state’s earned income tax credit for 2020 from 23% of the federal credit to 41.5%, a change that could translate to hundreds or even over a thousand dollars in new credits for low- to moderate-income households.

Gov. Ned Lamont announced Wednesday he has instructed the state Department of Revenue Services to enact the change, which is expected to benefit 198,708 households that earned up to $56,844 in 2020 and filed for that year’s EITC.

The scale of the enhancement granted to each household is need-tested and depends on the size of its federal credit, which the Internal Revenue Service calculates based on taxpayers’ income, marital status and number of qualifying children.

A single parent of two at the federal poverty level who received a $1,246 state credit in the spring, for example, would now receive an additional $1,002 for a total state credit of $2,248.

The state will use federal pandemic relief money to make up the $75 million in revenue it will miss out on, officials said.

In a statement, Lamont said the retroactive enhancement is needed to assist low- to moderate-income working individuals and families who have been disproportionately affected by COVID-19 and its resulting economic fallout.

“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. “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.”

The Department of Revenue Services plans to issue checks for the additional credit to eligible households before the end of February.

The state’s earned income tax credit has hovered between 23% and 30% since its creation in 2011. The rate was recently increased to 30.5% under the fiscal year 2022-23 biennial state budget Lamont signed into law in June.

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