Earned Income Credit

by State Representative Joe Gresko, (D)
121st Connecticut House District

Dear Neighbor,

Great news for working families in Connecticut.

Governor Ned Lamont has announced that he is directing the Connecticut Department of Revenue Services to retroactively enhance the 2020 Connecticut Earned Income Tax Credit from 23% of the federal credit to 41.5% to support low-to-moderate income working individuals and families disproportionately burdened by COVID-19.

The enhancement will benefit households that earned up to $56,844 in 2020 and filed for that year’s EITC. The amount of each household’s enhanced credit is need-tested and depends on the size of its federal credit. The Connecticut Department of Revenue Services will issue checks for the additional credit to eligible households before the end of February. Checks will be automatically sent to those who received the benefits last year.

The $75 million cost of the enhanced credit will be covered by the final portion of the state’s $1.38 billion Coronavirus Relief Fund, made available through the federal CARES Act.

Editor’s Note: The following information is from the Department of Revenue Services.

Nearly 200,000 Low-to-Moderate Income Working Individuals and Families Will Receive Significant Boost in State Income Tax Credits. The enhancement will benefit 198,708 households that earned up to $56,844 in 2020 and filed for that year’s EITC. The amount of each household’s enhanced credit is need-tested and depends on the size of its federal credit, which the IRS calculates based on taxpayers’ income, marital status, and number of qualifying children.

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

The $75 million cost of the enhanced credit will be covered by the final portion of the state’s $1.38 billion Coronavirus Relief Fund, made available through the federal CARES Act. Connecticut previously used its Coronavirus Relief Fund to purchase PPE, expand access to testing, and support schools, small businesses, non-profits, nursing homes, hospitals, renters, homeowners, public colleges, and municipalities dealing with the unexpected costs of COVID-19.

“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,” Governor 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. I thank Connecticut’s outstanding Congressional delegation and our partners in the U.S. Treasury Department for giving us the tools we need to enhance last year’s credit in this time of economic uncertainty for so many.”

“With the federal government’s strong financial support to the state to help combat the COVID-19 pandemic, Connecticut has stood up one of the best testing and vaccination programs in the country,” Connecticut Office of Policy and Management Secretary Melissa McCaw said. “Our hard work, strong fiscal stewardship, and oversight of these dollars has paid off, allowing us to leverage remaining Coronavirus Relief Funds to put more money in the pockets of those who have been deeply impacted by the pandemic and could really use our support. The EITC is one of the most effective programs for getting support to hard-working families who have experienced tremendous economic uncertainty, many of whom have done the work that kept our state and its economy churning throughout this public health crisis. We are grateful to our federal partners for the resources and ability to expand this benefit to our friends, family, and neighbors who have been struggling to make ends meet and provide for their families and it is our hope this will grant them some security in the new year.”

“This enhancement – made possible by federal funds from the CARES Act – provides relief to working families and lifts thousands of children out of poverty,” the members of Connecticut’s Congressional delegation said in a joint statement. “It is also a force multiplier for economic recovery across our state. We will continue to fight for investments like these that put money back in the pockets of Connecticut families.”

The governor particularly credited Senate President Pro Tempore Martin M. Looney (D-New Haven), who successfully fought to create and increase the Connecticut Earned Income Tax Credit as a way of making the state’s tax system more progressive and providing relief to working families.

“Passage of Connecticut’s Earned Income Tax Credit was secured only after a long uphill battle against the opposition of Republican governors,” Senator Looney said. “Our EITC now helps hundreds of thousands of Connecticut residents. The governor’s expansion of the EITC will result in lifting more working people out of poverty and putting more money back into our local and state economies. I want to thank Governor Lamont for taking this action to help needy families across Connecticut that suffered immeasurably during the height of the pandemic.”

The enhanced credit will provide additional support for the children lifted out of poverty by the 2021 federal Child Tax Credit, which expires this week. The Connecticut households receiving the enhanced credit are home to more than 220,000 children and other dependents. Nationally, 97% of federal EITC benefits go to families with children.

The Connecticut Earned Income Tax Credit was created in 2011 and has had varying rates over the last decade, including 30% in 2011 and 2012, 25% in 2013, 27.5% from 2014 to 2016, and 23% from 2017 to 2020.

The rate was recently increased to 30.5% under the fiscal year 2022-2023 biennial state budget that Governor Lamont signed into law in June. That newly enacted increase brings Connecticut’s rate higher than the neighboring states of Massachusetts and New York, which are both at 30%.

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