Pursuant to Section 641 of June Spec. Sess. Public Act 17‑2, for the taxable year beginning on January 1, 2019, an individual with a federal filing status of single, married filing separately or head of household, with federal AGI for the taxable year of less than $75,000, or married filing jointly with federal AGI of less than $100,000 will be allowed to subtract 14% of any pension or annuity income received for the taxable year when calculating Connecticut AGI. This subtraction modification only applies to the extent that the pension or annuity income has already been properly included in federal AGI.
For purposes of calculating the amount of the subtraction modification to report on the Connecticut income tax return (Line 48b, on Schedule 1 of the 2019 Form CT‑1040), the term “pension and annuity income” means the pension and annuity income reported on Line 4d of the 2019 federal Form 1040 or Form 1040‑SR, reduced by any military retirement pay and any Tier 1 and Tier 2 railroad retirement benefits. The amounts reported on Line 4d of the federal income tax return are the taxable distributions from retirement plans, including the following:
• Defined benefit plans;
• 401(k), 403(b) and governmental 457(b) plans;
• Military retirement pay; and • Tier 1 and Tier 2 railroad retirement benefits.
Taxpayers must reduce the amount reported on Line 4d of the federal income tax return by the amount of any military retirement pay and any Tier 1 and Tier 2 railroad retirement benefits. This is required because Connecticut already allows a separate subtraction modification for military retirement pay (Line 44, Schedule 1, Form CT‑1040), and for Tier 1 and Tier 2 railroad retirement benefits or supplemental annuities (Line 43, Schedule 1, Form CT‑1040).
The following amounts are not included in Line 4d of the federal income tax return and should not be added when calculating the pension and annuity amount for Line 48b of Form CT‑1040:
• Disability pensions received before the recipient met the minimum retirement age set by his or her employer;
• Corrective distributions of excess elective deferrals or other excess contributions to retirement plans; and
• Distributions from traditional IRAs, Roth IRAs, simplified employee pension (SEP) IRAs, and savings incentive match plans for employees (SIMPLE) IRAs.
A survivor or beneficiary of a plan participant may claim the 14% subtraction modification for Connecticut income tax purposes in the same manner as the plan participant would have been allowed to claim the modification, if such survivor or beneficiary is required to report the pension and annuity income on the federal income tax return in the same manner as the plan participant would have reported such income.
Individuals receiving income from the Teachers’ Retirement System: Taxpayers may not claim the 25% Teachers’ Retirement System income subtraction modification and the 14% pension and annuity income subtraction modification for the same income. However, if a taxpayer filing an individual return or a joint return has income from the Teachers’ Retirement System and income from a pension or annuity that qualifies for the pension or annuity subtraction modification, then the taxpayer may claim both modifications.