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OLR Bill Analysis
HB 5408
AN ACT CONCERNING THE QUALIFYING INCOME THRESHOLDS
FOR CERTAIN PERSONAL INCOME TAX DEDUCTIONS FOR
MARRIED INDIVIDUALS FILING JOINTLY.
SUMMARY
Beginning with the 2022 tax year, this bill increases the income
threshold for joint filers to qualify for the (1) 100% Social Security
income tax exemption and (2) pension and annuity income tax
exemption. Under current law, joint filers with federal adjusted gross
incomes (AGI) of less than $100,000 may, when calculating their income
for state income tax purposes, deduct (1) 100% of their federally taxable
Social Security income and (2) a specified portion of their qualifying
pension and annuity income (56% for 2022). This bill increases this
threshold to $150,000. The bill also makes a conforming change allowing
joint filers with incomes equal to or greater than this threshold to qualify
for a partial Social Security exemption (see BACKGROUND).
The bill similarly increases, from $100,000 to $150,000, the income
threshold for joint filers to qualify for the individual retirement account
(IRA) income exemption allowed beginning in the 2023 tax year.
As under existing law, the threshold for single filers and married
people filing separately remains at $75,000 for all three income tax
exemptions. For heads of households, the threshold remains at $100,000
for the Social Security exemption and $75,000 for the pension and
annuity and IRA income exemptions.
EFFECTIVE DATE: July 1, 2022, and applicable to tax years beginning
on or after January 1, 2022.
BACKGROUND
Partial Social Security Income Deduction
By law, taxpayers with a federal AGI at or above the thresholds for 2022HB-05408-R000599-BA.DOCX
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the 100% Social Security exemption qualify for a partial deduction.
Under this partial deduction, no more than 25% of total Social Security
benefits received is subject to state income tax. Specifically, the
deduction equals the difference between the (1) amount of Social
Security benefits includable for federal income tax purposes and (2)
lesser of 25% of the (a) Social Security benefits received during the
taxable year or (b) “excess of base amount” for federal tax purposes.
Pension and Annuity and IRA Exemptions
By law, the income tax on qualifying pension and annuity income for
taxpayers with AGIs below specified thresholds phases out over six
years, from 2019 to 2025. The exemption is 56% for 2022, 70% for 2023,
84% for 2024, and 100% beginning in 2025.
The income tax on distributions from IRAs, other than Roth IRAs, is
scheduled to phase out over four years beginning with the 2023 tax year.
The exemption is 25% for 2023, 50% for 2024, 75% for 2025, and 100%
beginning in 2026. The qualifying income thresholds for this exemption
are the same as those for the pension and annuity exemption.
Related Bill
sSB 11 (§ 2), favorably reported by the Finance, Revenue and Bonding
Committee accelerates the phase-in of the pension and annuity income
tax exemption by allowing qualifying taxpayers to deduct 100% of their
eligible income beginning with the 2022 tax year.
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable
Yea 51 Nay 0 (04/05/2022)