Connecticut Deductions From Income
Exempt Dividends From Certain Qualifying Mutual Funds Derived From U.S. Government Obligations
Enter the total amount of exempt dividends received from a qualifying mutual fund that are derived from U.S. government obligations. A mutual fund is a qualifying fund if, at the close of each quarter of its taxable year, at least 50% of the value of its assets consists of U.S. government obligations. The percentage of dividends that are exempt dividends should be reported to you by the mutual fund. Do not enter the amount of dividend income derived from Federal National Mortgage Association (Fannie Mae) bonds, Government National Mortgage Association (Ginnie Mae) bonds, and Federal Home Loan Mortgage Corporation (Freddie Mac) securities. Federal law does not prohibit states from taxing income derived from these obligations, and this income is taxable for Connecticut income tax purposes.
Example: A qualifying mutual fund pays a dividend of $100. Of the distribution, 55% is attributable to U.S. Treasury bills and 45% to other investments. The amount reported is $55.
Interest on U.S. Government Obligations Enter the total amount of interest income (to the extent includible in federal adjusted gross income) derived from U.S. government obligations, which federal law prohibits states from taxing (for example, U.S. government bonds such as Saving Bonds Series EE or Series HH and U.S Treasury bills or notes).
Social Security Benefit Adjustment If you receive Social Security benefits subject to federal income tax,you may reduce or eliminate the amount of your benefi ts subject to Connecticut income tax. Your Social Security benefits are fully exempt from Connecticut income tax if your required fi ling status is single or married filing separately and the amount reported on Form CT-1040, Line 1, is less than $50,000; or married fi ling
jointly, qualifying widow(er) with dependent child, or head of household and the amount reported on Form CT-1040, Line 1, is less than $60,000.
Tier 1 and Tier 2 Railroad Retirement Benefits and Supplemental Annuities
If you received Tier 1 or Tier 2, or both, railroad retirement benefits or supplemental annuities during 2016, you may deduct the amount included in your federal adjusted gross income but only to the extent the benefits were not already subtracted from federal adjusted gross income on Line 42 (Social Security Benefit Adjustment). Enter the balance not already subtracted of Tier 1 and Tier 2 railroad retirement benefits reported on federal Form 1040, Line 16b or Line 20b, or federal Form 1040A, Line 12b or Line 14b. Likewise, enter the amount of railroad unemployment benefits, including sickness benefits paid by the Railroad Retirement Board (RRB) in lieu of unemployment benefits, to the extent included in your federal adjusted gross income. However, do not enter sickness benefits paid by the RRB resulting from an on-the-job injury because these benefits are not included in your federal adjusted gross income.
Beneficiary’s Share of Connecticut Fiduciary Adjustment
If you have any income from an estate or trust, your share of any Connecticut modifications (that is, your share of the Connecticut fiduciary adjustment) that applies to the income will be shown on Schedule CT-1041B, Part 1, Column 5. Your share of these modifications should be provided to you by the fiduciary. If you are a beneficiary of more than one trust or estate, enter the net amount of all modifications.
Gain on Sale of Connecticut State and Local Government Bonds
Enter the total of all gains from the sale or exchange of notes, bonds, or other obligations of the State of Connecticut or its municipalities used to determine gain (loss) for federal income tax purposes.
Connecticut Higher Education Trust (CHET) Contributions
Enter your contributions to a CHET account(s). The modification cannot exceed the maximum allowable contribution. The maximum CHET contribution that may be subtracted is the lesser of:
1. the amount of contributions to all CHET accounts during the taxable year; or
2. (A) $5,000 for each individual taxpayer (including individuals whose filing status on their Connecticut income tax return is single, head of household, filing separately
(B) $10,000 for individuals whose filing status on their Connecticut income tax return is filing jointly or qualifying widow(er) with dependent child.
If your CHET contribution during the taxable year exceeds the maximum CHET contribution, the excess may be carried forward for the five succeeding taxable years provided the CHET contribution carried forward and subtracted from federal adjusted gross income of the succeeding taxable years does not exceed the maximum CHET contribution. CHET contributions made in the current taxable year are used before using any carryover from prior years. Enter the CHET account number in the space provided. If you made contributions to more than one account, you enter only one account number.
100% of Military Retirement Pay
For taxable years beginning on or after January 1, 2015, one hundred percent (100%) of military retirement pay is exempt from Connecticut individual income tax.
Subtract income received as military retirement pay, to the extent included in federal adjusted gross income, if you are a retired member of the armed forces of the United States or the National Guard (retired military member) or if you are a beneficiary receiving survivor benefits under an option or election made by a deceased retired military member.
Payments received by a former spouse of a retired military member, under a final decree of divorce, dissolution, annulment, or legal separation or a court ordered, ratified, or approved property settlement incident to a decree dividing military retirement pay, do not qualify for the military retirement pay exclusion.
25% of Connecticut Teacher’s Retirement Pay Subtract 25% of the income received from the Connecticut
teacher’s retirement system, provided you properly included such income in federal adjusted gross income for federal income tax purposes.
Other Subtractions from Income
1. Subtract any income or gain of an enrolled member of the Mashantucket Pequot Tribe who resides in Indian country of such tribe or any income or gain of an enrolled member of the Mohegan Tribe who resides in Indian country of such tribe where the income or gain is derived from or connected with Indian country of the tribe. Enter the words “Mashantucket Pequot Tribe enrolled member” or “Mohegan Tribe enrolled member,” as the case may be.
2. Subtract the amount of interest earned on funds deposited in a Connecticut individual development account to the extent included in federal adjusted gross income.
3. Subtract any interest paid on indebtedness incurred to acquire investments that provide income taxable in Connecticut but exempt for federal purposes that is not deductible in determining federal adjusted gross income, and is attributable to a trade or business of that individual.
4. Subtract expenses paid or incurred for the production (including management, conservation, and maintenance of property held for production) or collection of income taxable in Connecticut but exempt from federal income tax that are not deductible in determining federal adjusted gross income, and are attributable to a trade or business of that individual.
5. Subtract the amount of any distributions you received from the CHET fund as a designated beneficiary to the extent includable in your federal adjusted gross income. Congress passed legislation excluding from federal gross income any distribution from a qualified State tuition program (such as CHET) to the extent the distribution is used to pay for qualified higher education expenses (Pub. L. No. 107-16, §402). To the extent any distribution from CHET is excluded from federal gross income, the amount should not be reported as a subtraction modification.
6. Subtract any amortizable bond premium on bonds that provide interest income taxable in Connecticut but exempt from federal income tax, which premiums were not deductible in determining federal adjusted gross income and are attributable to a trade or business of that individual.
7. Subtract the amount of any interest income from notes, bonds, or other obligations of the State of Connecticut included in federal adjusted gross income. This modification includes any Build America Bond tax credit amount if the Build America Bond, as described in Section 1531 of the American Recovery and Reinvestment Act of 2009 was issued by the State of Connecticut or a Connecticut subdivision and only to the extent the credit amount is treated as interest included in gross income for federal income tax purposes.
8. Subtract the amount of any interest, dividends, or capital gains earned on contributions to accounts established for a designated beneficiary under the Connecticut Homecare Option Program for the Elderly to the extent the interest, dividends, or capital gains are properly included in the gross income of the designated beneficiary for federal income tax purposes.
9. Subtract contributions made to an MRA established pursuant to Conn. Gen. Stat. §32-9zz.
10. Subtract 20% of the Cancellation of Debt Income amount that you added to your federal adjusted gross income on either your 2009 or 2010 Form CT-1040, Line 33 or Form CT-1040NR/PY, Line 35. You may
subtract 20% of that Cancellation of Debt Income amount on the comparable line of your Connecticut
income tax return for the 2016, 2017, and 2018 taxable years.
To view the 2016 Form CT-1040 instructions click here