Changes Affecting Connecticut Personal Income Taxes

Personal Tax Changes

The Tax Cuts and Jobs Act of 2017 made significant revisions to federal personal income taxation. In response, the Connecticut General Assembly enacted legislative changes that effect the Connecticut personal income tax calculation.

Modification of IRC Section 168(k) Bonus Depreciation

For taxable years beginning on or after January 1, 2017, a taxpayer who deducts Internal Revenue Code (IRC) section 168(k) bonus depreciation on his federal income tax return for property placed in service after September 27, 2017, must add back such deduction when computing Connecticut adjusted gross income.

Modification of IRC Section 179 Deduction

For taxable years beginning on or after January 1, 2018, taxpayers must add back 80% of the IRC section 179 deduction taken for federal income tax purposes.

Subtraction Modification of Bioscience Investment Income

Beginning on or after January 1, 2018, a general partner of a qualified venture capital fund (as defined in the Code of Federal Regulations) can, in calculating Connecticut adjusted gross income, subtract the income generated by investments in eligible Connecticut bioscience businesses that was included in federal adjusted gross income.

Payment by Pass-Through Entities on Behalf of Nonresident Partners and Shareholders

Beginning on or after January 1, 2018, partnerships and S corporations doing business in Connecticut or with Connecticut-sourced income are no longer required to pay Connecticut income tax on behalf of their non partners or shareholders.

Penalty for Failure to Disclose Reportable Transactions

After January 1, 2018, audits of returns where there is a failure to disclose a reportable transaction (as defined in the IRC section 6707A) that is also required to be disclosed for federal purposes will be subject to a 75% penalty.

More Changes to Come

Because Connecticut is facing a large budget deficit, additional tax changes are expected for the 2019 legislative session. Most recently, Connecticut’s new governor proposed massive sales and use tax changes that effect most industries, including a proposal for sales tax on professional accounting services.

Obamacare

Obama Health Care

Nine years after enactment of Obamacare, the health law again takes center stage. A court in Texas ruled it invalid last December and the law’s supporters have appealed the decision. Most provisions will still apply for 2019 or until litigation is final. The case will be heard next by the U.S. Court of Appeals for the 5th Circuit and then quite possibly by the Supreme Court. Continue reading “Obamacare”

Long Term Care

Long Term Health Care

Seventy percent of Americans age 65 and older will need some form of long-term care during their lifetime and fifty percent will need care in a nursing home. Unfortunately, the United States has no form of health insurance system for long term care. Too many, this comes as a rude awakening as their health declines and the need for care arises.

This issue effects just about everyone. While the estate tax is now a concern for only a limited number of people due to the increased federal and New York State estate tax exemptions, chronic illnesses such as Alzheimer’s disease or Parkinson’s disease can affect anyone, regardless of net worth. For many middle-class families a catastrophic illness can result in bankruptcy. Unfortunately, our country, in deciding whether to pay for care, discriminates based on the type of care you need. If you need skilled nursing care such as rehabilitation services, then Medicare offers some limited coverage. However, if you need help with activities of daily living, such as bathing, toileting, dressing, etc., Medicare will not pay for the cost of your care. Thus, you are forced to pay out-of-pocket for this very expensive care, which can exceed $200,000 annually.

If you have an illness such as Alzheimer’s disease, this can last several years, and the cost of care can be exorbitant. Medicaid, the only government benefit program which pays for long term care, is intended to be for those who are poor and has strict income and asset requirements that must be met before any benefits are paid.

One of your options may be to purchase long-term care insurance. This is insurance specifically designed to cover care delivered at home, in an assisted living facility or in a nursing home, as the case may be.

Whatever you decide to do, please at least take time to think through these issues with a qualified professional and make an informed decision as to next steps.