Connecticut — Personal Income Tax

Connecticut requires a personal income tax return from three categories of individuals: residents, nonresidents, and part-year residents.

A resident must file if federal gross income (with applicable Connecticut modifications) exceeds the personal exemption amount. A natural person is a resident if domiciled in Connecticut, unless specific exceptions apply—such as maintaining no permanent place of abode in Connecticut, maintaining a permanent place of abode elsewhere, and spending 30 days or fewer in Connecticut during the tax year. An individual who maintains a permanent place of abode in Connecticut and spends more than 183 days in the state is also treated as a resident for tax purposes, even if domiciled elsewhere.

A nonresident with Connecticut-sourced income must file if that income, when combined with federal gross income (adjusted by Connecticut modifications), exceeds the personal exemption.

A part-year resident—someone who moved into or out of Connecticut during the year—must file if they meet the gross income test or had a federal alternative minimum tax liability.

All three categories are also required to file if they had Connecticut income tax withheld, made estimated payments, are claiming the Connecticut earned income tax credit, or received a pass-through entity tax credit.

Source: Conn. Gen. Stat. § 12-701 | Conn. Agencies Regs. § 12-740(a)-1 | Connecticut DRS, Nonresident/Part-Year Resident Tax Information

Connecticut imposes a graduated income tax on Connecticut taxable income with seven marginal rate brackets ranging from 2% to 6.99%, effective for taxable years beginning on or after January 1, 2024. A 2023 law reduced the bottom two rates from 3% and 5% to 2% and 4.5%, respectively; the other five brackets (5.5%, 6%, 6.5%, 6.9%, and 6.99%) remain unchanged. The rates are marginal, meaning only income within each bracket is taxed at the corresponding rate. Bracket thresholds vary by filing status (single, married filing jointly, married filing separately, and head of household).

Source: Conn. Gen. Stat. § 12-700 | Connecticut OLR, A Guide to Connecticut's Personal Income Tax (2024)

Connecticut personal income tax returns are due on or before April 15 following the close of the calendar tax year. Conn. Gen. Stat. § 12-719(a) requires that "the income tax return required under this chapter shall be filed on or before the fifteenth day of the fourth month following the close of the taxpayer's taxable year." For calendar-year taxpayers, the fourth month following December 31 is April, making the statutory deadline April 15.

When April 15 falls on a weekend or legal holiday, the deadline shifts to the next business day. This deadline applies to residents, nonresidents, and part-year residents.

An extension of time to file may be requested under Conn. Gen. Stat. § 12-723, but any tax owed must still be paid by the April 15 deadline to avoid penalties and interest. The extension applies only to the time to file the return, not to the time to pay the tax liability.

Source: Conn. Gen. Stat. § 12-719(a) | Conn. Gen. Stat. § 12-723

Connecticut allows personal exemptions that reduce Connecticut adjusted gross income to determine taxable income. The base exemption amounts vary by filing status: $15,000 for single filers, $19,000 for head of household, and $24,000 for married filing jointly or surviving spouse. These exemptions phase out by $1,000 for each $1,000 (or fraction thereof) by which Connecticut AGI exceeds threshold levels. For single filers, the phaseout begins at $30,000 of Connecticut AGI. For head of household, it begins at $38,000. For married filing jointly, it begins at $48,000. The exemption is completely eliminated when Connecticut AGI reaches the base exemption amount plus the phaseout threshold.

Source: Conn. Gen. Stat. § 12-702 | Connecticut OLR, A Guide to Connecticut's Personal Income Tax (2024)

Connecticut treats an individual as a resident for income tax purposes if the individual maintains a permanent place of abode in Connecticut and spends more than 183 days in the state during the taxable year, even if the individual is domiciled elsewhere. A Connecticut day includes any part of a day, except when the individual is present solely while in transit to a destination outside Connecticut. This statutory residency test operates independently of domicile; a person who satisfies both requirements is taxed as a Connecticut resident on worldwide income.

Source: Conn. Gen. Stat. § 12-701(a)(1)(B) | Conn. Agencies Regs. § 12-701(a)(1)-1(c)

Connecticut taxes nonresidents only on income derived from or connected with sources within Connecticut. Conn. Gen. Stat. § 12-711 governs the sourcing framework and defines which income categories are subject to Connecticut tax for nonresidents and part-year residents during their nonresidency period.

## General sourcing categories

Connecticut-source income includes items attributable to four principal categories:

1. Real or tangible personal property — Ownership or disposition of any interest in real property located in Connecticut or tangible personal property located in Connecticut.

1. Business, trade, profession, or occupation — Any business, trade, profession, or occupation carried on in Connecticut, including compensation for personal services rendered by a nonresident employee in the state.

1. S corporation and partnership interests — Pro rata share of S corporation income, distributive share of partnership income, and share of estate or trust income, to the extent those entities source income to Connecticut under Conn. Gen. Stat. § 12-712 and § 12-714.

1. Connecticut Lottery winnings — Winnings from wagers placed in a lottery conducted by the Connecticut Lottery Corporation, if the proceeds must be reported to the IRS under the Internal Revenue Code.

## Wage and salary sourcing: day-count allocation

For nonresident employees who perform services both inside and outside Connecticut, compensation is sourced based on the location where the services are performed. When a nonresident employee can establish the exact amount of pay received for services performed in Connecticut, that exact amount constitutes Connecticut-source income.

When exact determination is not possible, the compensation is apportioned using a day-count fraction: total compensation is multiplied by a fraction in which the numerator is the number of days spent working in Connecticut and the denominator is total working days both within and without Connecticut. "Total working days" excludes holidays, sick days, vacations, and paid or unpaid leave. A working day spent partly in Connecticut and partly elsewhere counts as one-half of a Connecticut day.

## 15-day de minimis threshold

For taxable years commencing on or after January 1, 2016, compensation for personal services rendered in Connecticut by a nonresident employee who is present in the state for not more than 15 days during a taxable year does not constitute Connecticut-source income. If a nonresident employee is present in Connecticut for more than 15 days during the taxable year, all compensation the employee receives for rendering all personal services in Connecticut during that taxable year constitutes Connecticut-source income.

For purposes of the 15-day test, presence in Connecticut for any part of a day constitutes being present for that entire day, unless the presence is solely for the purpose of transit through Connecticut.

## Intangible personal property

Income from intangible personal property—including annuities, dividends, interest, and gains from the disposition of intangible personal property—generally does not constitute Connecticut-source income for nonresidents, except to the extent that such income is from:

• Property employed in a business, trade, profession, or occupation carried on in Connecticut, or
• Winnings from a Connecticut Lottery Corporation wager reportable to the IRS.

This exclusion means that a nonresident who owns stock or bonds and does not use those assets in a Connecticut business is not taxed on the dividend or interest income, even if the issuer is a Connecticut-based corporation.

## Convenience-of-the-employer rule (effective for taxable years beginning on or after January 1, 2019)

Conn. Gen. Stat. § 12-711(b)(2)(C) adopts a reciprocal convenience-of-the-employer sourcing rule. For purposes of determining compensation derived from or connected with sources within Connecticut, a nonresident natural person must include income from days worked outside Connecticut for the nonresident's convenience if the nonresident's state of domicile uses a similar test.

In practice, this means that a nonresident domiciled in New York (or another state that applies a convenience-of-the-employer rule) who telecommutes from that home state for a Connecticut-based employer will have that remote-work income sourced to Connecticut unless the remote work is performed outside Connecticut due to the necessity of the employer rather than the convenience of the employee. This provision is reciprocal: it applies only to residents of states that themselves impose a convenience-of-the-employer test. The rule does not apply to sources of income other than compensation for personal services rendered by a nonresident employee, and does not apply to athletes, entertainers, or performing artists.

## Nonqualified deferred compensation

Compensation from nonqualified deferred compensation plans attributable to services performed within Connecticut constitutes Connecticut-source income, including compensation required to be included in federal gross income under IRC Section 457A.

## Entity interest sale

For purposes of the real-property sourcing category, "real property in this state" includes an interest in a partnership, limited liability company, or S corporation that owns (directly or indirectly) real property located within Connecticut with a fair market value equaling or exceeding 50% of all the entity's assets on the date of sale or disposition by a nonresident, using only assets owned by the entity (directly or indirectly) for at least two years prior to the sale or disposition. Gain or loss from the sale of such an interest is sourced to Connecticut in proportion to the Connecticut real-property fraction.

Source: Conn. Gen. Stat. § 12-711 | Conn. Agencies Regs. § 12-711(c)-5 | Conn. Agencies Regs. § 12-711(b)-1

Connecticut personal income tax starts with federal adjusted gross income (federal AGI) as the baseline and then applies specific additions and subtractions mandated by statute to arrive at Connecticut adjusted gross income (Connecticut AGI). These modifications are enumerated in Conn. Gen. Stat. § 12-701(a)(20) and detailed in Conn. Agencies Regs. § 12-701(a)(20)-2 (additions) and § 12-701(a)(20)-3 (subtractions).

## Additions to federal AGI

Connecticut residents must add the following items to federal AGI when computing Connecticut AGI:

Interest and dividend income from other states' obligations. Interest income on obligations issued by or on behalf of any state (other than Connecticut) or any political subdivision, public instrumentality, state or local authority, district, or similar public entity of any such state, and interest income on obligations issued by or on behalf of the District of Columbia, to the extent not properly includible in federal gross income. Interest income on Connecticut obligations is not added. Interest income on obligations issued by or on behalf of any territory or possession of the United States (such as Puerto Rico, Guam, or the Virgin Islands) is also not added.

Exempt-interest dividends from other states' obligations. Exempt-interest dividends, as defined in Section 852(b)(5) of the Internal Revenue Code, from regulated investment companies, to the extent such dividends are derived from obligations issued by or on behalf of any state (other than Connecticut) or political subdivision thereof, and to the extent not properly includible in federal gross income. Exempt-interest dividends derived from Connecticut obligations or U.S. territory obligations are not added.

Beneficiary's share of Connecticut fiduciary adjustment (if positive). For a person who is the beneficiary of a trust or estate, the beneficiary's share of the Connecticut fiduciary adjustment, as determined under Conn. Gen. Stat. § 12-714, but only if the adjustment is greater than zero.

Loss on sale of Connecticut state and local government bonds. To the extent deductible in computing federal AGI, any loss from the sale or exchange of Connecticut obligations, in the taxable year such loss was recognized.

Bonus depreciation add-back (Section 168(k)). Any additional allowance for depreciation under Section 168(k) of the Internal Revenue Code for property placed in service after September 27, 2017, to the extent such allowance is deductible in computing federal AGI. Connecticut decouples from the federal bonus depreciation deduction and requires it to be added back; taxpayers may then subtract 25% of the added-back amount in each of the four succeeding taxable years.

Section 179 expensing add-back. Eighty percent (80%) of any deduction allowable under Section 179 of the Internal Revenue Code for the taxable year, to the extent deductible in computing federal AGI. Taxpayers may then subtract 25% of the 80% added-back amount in each of the three succeeding taxable years.

S corporation apportioned loss (residents). With respect to an individual who is a shareholder of an S corporation that carries on business in Connecticut, the amount of the individual's pro rata share of the corporation's nonseparately computed loss, to the extent included in federal AGI, multiplied by the corporation's apportionment fraction as determined under Conn. Gen. Stat. § 12-218.

## Subtractions from federal AGI

Connecticut residents must subtract the following items from federal AGI when computing Connecticut AGI:

U.S. government obligations interest. To the extent properly includible in federal gross income, any income with respect to which taxation by any state is prohibited by federal law. This includes interest on obligations issued by or on behalf of the United States, such as U.S. Treasury bonds, notes, bills, U.S. savings bonds, and certain other obligations (e.g., obligations of the Home Owners' Loan Corporation) that Congress has expressly prohibited states from taxing.

Exempt dividends from qualified regulated investment companies. To the extent allowable under Conn. Gen. Stat. § 12-718, exempt dividends paid by a qualified regulated investment company. A regulated investment company is qualified if, at the close of each quarter of its taxable year, at least 50% of the value of its total assets is invested in obligations the taxation of which by states is prohibited by federal law.

State income tax refunds. The amount of any refund or credit for overpayment of income taxes imposed by Connecticut, or any other state of the United States or political subdivision thereof, or the District of Columbia, to the extent properly includible in federal gross income. This prevents double taxation when a prior year's state tax overpayment was deducted federally and is later refunded. The modification does not include any portion of the refund that represents interest received.

Railroad retirement benefits (Tier 1 and Tier 2). To the extent properly includible in federal gross income, annuities (including Tier 1 and Tier 2 railroad retirement benefits) as defined in 45 U.S.C. § 231(p), and supplemental annuities as described in 45 U.S.C. § 231a(b).

Military retirement pay. To the extent properly includible in federal gross income, military retirement pay received by a person retired from service in the U.S. armed forces.

Pension and annuity income (phased subtraction). Under Conn. Gen. Stat. § 12-701(a)(20)(B)(xviii), qualifying taxpayers may subtract a percentage of pension and annuity income (including taxable IRA and 401(k) distributions), subject to phase-out based on filing status and Connecticut AGI. For single filers with Connecticut AGI below $75,000, the subtraction is 100%. The subtraction is phased down dollar-for-dollar for Connecticut AGI between $75,000 and $100,000, and fully eliminated at $100,000 and above. For married filing jointly, the phase-out range is $100,000 to $150,000. Different thresholds apply to other filing statuses. This subtraction does not apply to military retirement pay, Tier 1 or Tier 2 railroad retirement benefits, or Connecticut teachers' retirement pay, as those are subtracted separately.

Connecticut teachers' retirement pay. To the extent properly includible in federal gross income, payments received under the Connecticut Teachers' Retirement System.

Bonus depreciation recapture (25% per year for four years). To the extent any additional allowance for depreciation under Section 168(k) of the Internal Revenue Code for property placed in service after September 27, 2017, was added to federal AGI in a prior year pursuant to Conn. Gen. Stat. § 12-701(a)(20)(A)(ix), twenty-five percent (25%) of such additional allowance in each of the four succeeding taxable years.

Section 179 recapture (25% per year for three years). To the extent eighty percent (80%) of any deduction under Section 179 of the Internal Revenue Code was added to federal AGI in a prior year pursuant to Conn. Gen. Stat. § 12-701(a)(20)(A)(viii), twenty-five percent (25%) of such 80% amount in each of the three succeeding taxable years.

S corporation apportioned income (residents). With respect to an individual who is a shareholder of an S corporation that carries on business in Connecticut, the amount of the individual's pro rata share of the corporation's nonseparately computed income, to the extent properly includible in federal gross income, multiplied by the corporation's apportionment fraction as determined under Conn. Gen. Stat. § 12-218.

Qualified tuition program distributions. To the extent properly includible in federal gross income, any distribution to a designated beneficiary from any qualified state tuition program, as defined in Section 529(b) of the Internal Revenue Code, established and maintained by Connecticut or any official, agency, or instrumentality of the state.

Qualified tuition program contributions. To the extent allowable under Conn. Gen. Stat. § 12-701a, contributions to accounts established pursuant to any qualified state tuition program (Section 529 plan) established and maintained by Connecticut or any official, agency, or instrumentality of the state.

Holocaust victims' settlement payments. To the extent properly includible in federal gross income, the amount of any Holocaust victims' settlement payment received in the taxable year by a Holocaust victim.

Individual development account interest. To the extent properly includible in federal gross income, interest earned on funds deposited in individual development accounts.

CHET baby scholar account income. Interest or other income earned on funds deposited in CHET baby scholar accounts, to the extent properly includible in federal gross income.

Expenses to produce federally exempt but Connecticut-taxable income. Expenses paid or incurred during the taxable year for (i) the production or collection of income that is subject to Connecticut income tax but exempt from federal income tax, (ii) the management, conservation, or maintenance of property held for the production of such income, or (iii) amortizable bond premium on any bond the interest income from which is subject to Connecticut income tax but exempt from federal income tax, to the extent such expenses would be deductible in determining federal AGI if such income were subject to federal income tax, and to the extent the expenses are attributable to a trade or business carried on by the individual.

Beneficiary's share of Connecticut fiduciary adjustment (if negative). For a person who is the beneficiary of a trust or estate, the beneficiary's share of the Connecticut fiduciary adjustment, as determined under Conn. Gen. Stat. § 12-714, but only if the adjustment is less than zero.

## Calculation summary

Connecticut AGI = Federal AGI + Total Additions − Total Subtractions

Once Connecticut AGI is determined, it is further reduced by the personal exemption amount (if applicable) to arrive at Connecticut taxable income.

Source: Conn. Gen. Stat. § 12-701(a)(20) | Conn. Agencies Regs. § 12-701(a)(20)-2 | Conn. Agencies Regs. § 12-701(a)(20)-3

Connecticut part-year residents are taxed on income from two distinct periods using a calculation method that ensures appropriate state tax on Connecticut-source income while applying graduated rates based on total income. The methodology is governed by Conn. Gen. Stat. § 12-717 and § 12-700(c), with implementing regulations in Conn. Agencies Regs. § 12-700(c)-1 and § 12-717(a)-1.

## Three-part income calculation

A part-year resident individual's Connecticut adjusted gross income derived from or connected with sources within this state equals the sum of three components under Conn. Gen. Stat. § 12-717(a):

1. Connecticut AGI for the period of residence, computed as if the taxable year for Connecticut income tax purposes were limited to the period of residence (all income worldwide during Connecticut residency);

1. Income derived from or connected with sources within Connecticut for the period of nonresidence, determined under the nonresident sourcing rules of Conn. Gen. Stat. § 12-711 as if the taxable year were limited to the period of nonresidence (only Connecticut-source income during nonresidency); and

1. Special accruals required by Conn. Gen. Stat. § 12-717(c)—items of income, gain, loss, or deduction that accrued economically before the change of status but were not otherwise includible in or deductible from Connecticut AGI for the taxable year under the taxpayer's regular accounting method.

The first component captures all income (from any source, in any state or country) earned or accrued while the individual was a Connecticut resident. The second component captures only Connecticut-source income (as defined in § 12-711) earned or accrued while the individual was a nonresident. The third component—special accruals—prevents taxpayers from avoiding Connecticut tax by timing the recognition of income or deductions around a change in residency status.

## Modifications to federal AGI apply to part-year residents

Part-year residents apply the same Connecticut modifications to federal adjusted gross income that apply to full-year residents—additions under Conn. Gen. Stat. § 12-701(a)(20)(A) (e.g., interest on other states' obligations, bonus depreciation add-backs) and subtractions under § 12-701(a)(20)(B) (e.g., U.S. government obligations interest, pension and annuity income, military retirement pay). However, the Connecticut AGI is then adjusted for special accruals: increased or decreased by items accrued under § 12-717(c)(1) (for individuals changing from resident to nonresident, to the extent not otherwise includible) or § 12-717(c)(2) (for individuals changing from nonresident to resident, to the extent included in Connecticut AGI for the taxable year).

## Proration of tax liability

Connecticut computes the tax on a part-year resident's Connecticut-source income using a proration method under Conn. Gen. Stat. § 12-700(c)(1). The calculation proceeds in two steps:

Step 1: Compute tentative tax as if the part-year resident were a full-year resident. Calculate Connecticut AGI (including the special accrual adjustments described above), subtract the personal exemption allowed under Conn. Gen. Stat. § 12-702, apply the graduated tax rates under § 12-700(a), and subtract any credit allowed under § 12-703 (earned income tax credit). This produces a tentative tax.

Step 2: Prorate the tentative tax by the Connecticut-source fraction. Multiply the tentative tax by a fraction:

• Numerator: the part-year resident's Connecticut AGI derived from or connected with sources within Connecticut (the three-part sum described above, reflecting both the resident-period worldwide income and the nonresident-period Connecticut-source income, plus special accruals).

• Denominator: the part-year resident's total Connecticut AGI from all sources (worldwide) for the entire taxable year, as increased or decreased by the special accrual adjustments.

The resulting product is the Connecticut income tax owed. If the part-year resident's Connecticut-source AGI exceeds total Connecticut AGI (which can occur when special accrual items produce a net addition), the statute provides that Connecticut-source income, reduced by the exemption, becomes Connecticut taxable income, and total Connecticut AGI becomes the denominator for the proration fraction.

## Special accruals: preventing timing manipulation

Conn. Gen. Stat. § 12-717(c) requires special accruals when an individual changes resident status. The rules differ depending on the direction of the change:

Change from resident to nonresident (§ 12-717(c)(1)): The individual must accrue to the resident portion of the taxable year (prior to the change) any items of income, gain, loss, or deduction that accrued prior to the change of status but are not otherwise properly entering into federal AGI for that portion of the taxable year or a prior taxable year under the individual's regular accounting method. Common examples include accounts receivable for cash-basis taxpayers, unrealized gains in property that appreciated while the individual was a resident, and deferred compensation attributable to services performed while a resident.

Change from nonresident to resident (§ 12-717(c)(2)): The individual must accrue to the nonresident portion of the taxable year (prior to the change) any items of income, gain, loss, or deduction that accrued prior to the change of status and that are properly entering into federal AGI for the taxable year. This prevents Connecticut from taxing income that economically accrued while the individual was a nonresident of Connecticut but is recognized for federal tax purposes after the change to Connecticut residency.

The special accrual rules do not apply if the individual files with the Commissioner a bond or other security acceptable to the Commissioner, conditioned upon the inclusion of amounts accruable under § 12-717(c) in Connecticut AGI or Connecticut-source income for one or more subsequent taxable years as if the individual had not changed resident status (Conn. Gen. Stat. § 12-717(c)(4)).

## Deductions allocated by period

Deductions—including the personal exemption, itemized deductions (to the extent they reduce Connecticut AGI through federal AGI), capital losses, passive activity losses, and net operating loss deductions—are allocated between the resident and nonresident portions of the taxable year under regulations issued by the Commissioner. Conn. Agencies Regs. § 12-717-1 addresses capital losses and passive activity losses; § 12-717-2 addresses net operating loss deductions for part-year residents. Generally, these deductions are allocated based on the income to which they relate, with carrybacks or carryforwards limited to Connecticut-source income for nonresident periods.

Source: Conn. Gen. Stat. § 12-717 | Conn. Gen. Stat. § 12-700(c) | Conn. Agencies Regs. § 12-700(c)-1 | Conn. Agencies Regs. § 12-717(a)-1

Connecticut allows a credit against Connecticut personal income tax for income taxes paid to other states, political subdivisions of other states, the District of Columbia, and provinces of Canada (and their political subdivisions), subject to statutory limitations designed to prevent double benefit and ensure the credit does not reduce Connecticut tax below what would be owed if the out-of-state income were excluded entirely.

## Eligibility: residents and part-year residents

Under Conn. Gen. Stat. § 12-704(a), a resident or part-year resident is allowed a credit for income taxes paid to a qualifying jurisdiction on income that (1) is derived from or connected with sources in that jurisdiction, and (2) is also subject to Connecticut income tax. The credit is available for taxes paid to any state of the United States (other than Connecticut), a political subdivision of another state (such as New York City), the District of Columbia, a province of Canada, or a political subdivision of a province of Canada.

Nonresidents are not eligible for the credit under § 12-704(a), because Connecticut taxes nonresidents only on Connecticut-source income; nonresidents do not face the same double-taxation situation that residents and part-year residents face when other states tax them on income earned in those states.

## Two statutory limitations on the credit amount

The credit is subject to two independent limitations under Conn. Gen. Stat. § 12-704(a)(3) and (4), and the credit allowed is the lesser of the two.

Limitation 1: Proportional limitation. The credit cannot exceed the proportion of the Connecticut tax otherwise due that the income subject to tax in the other jurisdiction bears to the taxpayer's total Connecticut adjusted gross income (Connecticut AGI). This ensures that the credit reflects only the Connecticut tax attributable to the income that was taxed elsewhere. The formula is:

> Credit ≤ (Income taxed by other jurisdiction ÷ Total Connecticut AGI) × Connecticut tax liability

Limitation 2: Floor limitation. The credit cannot reduce the Connecticut tax to an amount less than what would have been due if the income subject to taxation by the other jurisdiction were excluded from Connecticut AGI. This prevents a taxpayer from using the credit to shelter Connecticut-source income or other income that was not taxed by the other state.

In practice, these two limitations work together to ensure that Connecticut collects tax on income sourced to Connecticut, while providing relief for income that is legitimately subject to tax in both Connecticut (because the taxpayer is a resident) and another jurisdiction (because the income is sourced there under that jurisdiction's rules).

## Application to part-year residents

For part-year residents, Conn. Gen. Stat. § 12-704(a)(3) provides that the proportional credit limitation applies only to the period of residency. The credit cannot exceed the proportion of the tax otherwise due during the period of residency that the income taxed by the other jurisdiction during the period of residency bears to the taxpayer's Connecticut AGI for the period of residency. Conn. Agencies Regs. § 12-704(a)-2 illustrates this with examples showing that a part-year resident who earns income in another state while a Connecticut resident may claim the credit, but the credit is prorated to reflect only the portion of the year during which the taxpayer was a Connecticut resident.

## Special rule: statutory residents under the 183-day test

Under Conn. Gen. Stat. § 12-704(d), an individual who is not domiciled in Connecticut but is treated as a Connecticut resident under the 183-day statutory-residency test (maintaining a permanent place of abode in Connecticut and spending more than 183 days in the state) and is domiciled in another state, political subdivision, or the District of Columbia for the taxable year is allowed a credit against Connecticut income tax for taxes paid to the domicile jurisdiction. This provision addresses the double-taxation situation faced by individuals who are statutory residents of Connecticut but domiciled elsewhere and therefore owe tax to both jurisdictions on their worldwide income.

## No double-dipping: prohibition on reciprocal credits

Conn. Gen. Stat. § 12-704(c) prohibits a taxpayer from claiming the Connecticut credit if the taxpayer has claimed or will claim a credit against the income tax imposed by the other jurisdiction for the Connecticut tax paid or payable. This prevents a taxpayer from obtaining a credit in both states for the same item of tax. In practice, this means a taxpayer must choose which state's credit to claim when both states offer a resident credit for taxes paid to the other. Typically, a taxpayer will claim the credit in the state of residence (where worldwide income is taxed) for taxes paid to the state of source (which taxes only income sourced there).

## Special rule for wages paid to another state by an employer

Effective for taxable years commencing on or after January 1, 2019, Conn. Gen. Stat. § 12-704(a)(5) provides that a tax on wages that is paid to another state, political subdivision, or the District of Columbia by an employer on behalf of an employee (and for which a credit is allowed by the other jurisdiction) is considered an income tax for purposes of the Connecticut resident credit. This provision addresses the situation in which an employer pays a nonresident income tax directly to another jurisdiction (such as under a reciprocal agreement or convenience-of-the-employer withholding regime) and the employee is allowed a credit in that jurisdiction. A Connecticut resident or part-year resident may claim a comparable credit against Connecticut tax for such employer-paid taxes, subject to the same limitations that apply to the general resident credit.

## Amended-return requirements when other-state tax changes

Under Conn. Gen. Stat. § 12-704(b)(1)(A), if—as a direct result of a change or correction to a taxpayer's income tax return filed with another jurisdiction by the tax officers of that jurisdiction, or of a taxpayer paying an assessment issued by another jurisdiction for a year for which the taxpayer had not filed a return—the amount of tax the taxpayer is finally required to pay to the other jurisdiction differs from the amount used to determine the Connecticut credit, the taxpayer must provide notice to the Commissioner of Revenue Services by filing an amended Connecticut return. The amended return must be filed within 90 days after the final determination of the other jurisdiction's tax amount, and the taxpayer must concede the accuracy of that determination in the amended Connecticut return.

For taxable years commencing on or after January 1, 2022, Conn. Gen. Stat. § 12-704(b)(1)(B) imposes a five-year limit on the time to claim an additional credit: the taxpayer may claim an additional resident credit (reflecting the increased tax paid to the other state) only if the amended Connecticut return is filed within five years from the date the original Connecticut tax return was filed. This limitation codifies a "shot clock" that prevents indefinite amendment for additional credits, even when the 90-day notice period is satisfied.

## Qualifying jurisdictions and multiple-jurisdiction credits

Conn. Agencies Regs. § 12-704(a)-4 defines "qualifying jurisdiction" to mean any state of the United States (other than Connecticut), a political subdivision of such a state, the District of Columbia, a province of Canada, or a political subdivision of a province of Canada. When a taxpayer claims the credit for taxes paid to two or more qualifying jurisdictions (other than a state and its political subdivision), the limitations are applied separately to each jurisdiction under Conn. Agencies Regs. § 12-704(a)-2. When a taxpayer pays tax to both a state and one or more of its political subdivisions (such as New York State and New York City), the credit computation is subject to special aggregation rules under Conn. Agencies Regs. § 12-704(a)-3, which ensure that the total credit does not exceed the Connecticut tax attributable to the income taxed by those overlapping jurisdictions.

Source: Conn. Gen. Stat. § 12-704 | Conn. Agencies Regs. § 12-704(a)-1 | Conn. Agencies Regs. § 12-704(a)-2 | Conn. Agencies Regs. § 12-704(a)-3