There are many changes to be aware of: Pass-through Entities, Sales Tax, Personal Income Tax and Corporate Income Tax
There are many changes to be aware of, here are some of the highlights:
The significant changes to pass-through entities are the inclusion of guaranteed payments in the calculation of pass-through entity tax and the credit rate decrease of 5.51%. Now, instead of receiving a personal income tax credit of 93.01% of the pass-through entity tax paid, it will be 87.5%.
Some of the most notable Connecticut legislative changes for 2019 have or will have a significant impact on sales tax.
Changes have occurred in determining who must collect and remit Connecticut sales tax. The state has joined many other states in implementing a $100,000 of sales and 200 or more transactions economic nexus threshold. Prior to July 1, 2019, companies that had no other relation to Connecticut were not required to collect and remit Connecticut sales tax if their sales were under $500,000 and less than 200 transactions.
As of October 1, 2019, digital goods are now subject to a sales tax rate of 6.35% and the tax on meals and beverages has increased 1% to 7.35%. The tax on alcoholic beverages other than beer has also increased at the distributor level by 10%. The floor tax for this increase will have to be paid by November 15th 2019 on their October 1, 2019 inventory. While the tax on most alcohol is increasing, craft beer sold to-go from the brewery will see a 50% reduction in the alcohol tax.
More changes will happen on January 1, 2020 when some previously exempt sales will become subject to sales tax. Previously exempt sales that will now be taxed include safety apparel, metered parking, dry cleaning and laundry excluding coin operated, and interior design services.
Personal Income Tax
For individuals, you will still need to have a dependent or be over 65 to qualify for the property tax credit. This deduction still phases out depending upon income level and filing status. The planned schedule of tax relief for teachers was delayed and teacher’s retirement payments will be 25% exempt from tax for two more years.
Corporate Income Tax
Corporations will be subject to the 10% surcharge for another two years. Along with this surcharge, the following credits have been limited to 50.01% of the corporation’s tax liability: research and development, research and experimental expenditures, and urban and industrial site reinvestment tax credits.
For more information and an overview of the changes: https://portal.ct.gov/DRS/Legislative-Summaries/2019-Legislative-Updates/Regular-Session-State-Tax-Legislation-Overview
If you would like to discuss how these changes impact you or your business, contact our professionals at The Innovative CPA Group at 203-489-0612. Or contact us online.