Connecticut made a variety of tax changes to individuals and businesses with the recent budget.  Guess what?  Taxes are going up.  The highlights are below and they are effective July 1, 2015.

Individual Tax Changes

  • The highest existing income tax bracket is increased.  The 6.7% tax bracket is increased to 6.9% in 2015.  It is for single filers with adjusted gross income exceeding $250,000, head of household filers with adjusted gross income exceeding $400,000 and joint filers with adjusted gross income exceeding $500,000.
  • There is a new tax bracket.  In 2015 there is also new tax rate of 6.99%.  It is for single filers with adjusted gross income exceeding $500,000, head of household filers with adjusted gross income exceeding $800,000 and joint filers with adjusted gross income exceeding $1,000,000.
  • Property Tax Credit decreased.  The tax credit will reduce to $200 in 2016.
  • Military retirement pensions are exempt from income tax for the 2015 tax year.

Business Tax Changes

  • 20% surtax is continued for income years through 2017.
  • Mandatory unitary combined reporting will be effective for income years starting on or after January 1, 2016.
  •  Net operating loss carryforwards are limited to 50% of net income for income years starting  January 1, 2015.
  • Tax credits are now limited to 50.01% of tax for income years starting January 1, 2015.

Sales Tax Changes

  • Car wash services are now taxable as of July 1, 2015.
  • Water company purchases are now taxable as of July 1, 2015.
  • Clothing and footwear sales are taxable.  The Exemption for clothing and footwear costing less than $50 was not restored.
  • Motor vehicle parking in seasonal parking lots and hospital garages is now taxable as of July 1, 2015.
  • Luxury sales tax rate increased to 7.75% as of July 1, 2015.   There is no change to items to which the rate applies.
  • Sales tax-free week will still be August 16-22 this year but only for items costing less than $100.
  • services in connection with the creation, development, hosting or maintenance of a website will be taxable at 1% as of October 1, 2015.
  • Sales tax return filing due date will be the end of the month (not the existing 20th day) for taxable periods ending on or after December 31, 2015
  • Cigarette tax increased to $3.65 a pack on October 1, 2015 and $3.90 a pack on July 1, 2016.

Estate Tax Changes

  •  Unified gift and estate tax is capped at $20 million for gifts made after January 1, 2016 and estates of decedents dying after January 1, 2016.