Connecticut lawmakers have passed a budget that increases taxes on restaurant meals and reduces the pass-through business tax credit which was designed to protect Connecticut taxpayers from the elimination of the federal deduction for state and local taxes. In addition, the state sales tax of 6.35% would apply to digital downloads of movies, music, books and video games. There is also a 2.25% tax on homes that sell for more than $2,500,000.
Last year, the legislature passed a law that was designed to help Connecticut taxpayers offset the loss of the federal deduction for sale and local taxes. The law imposed a tax on pass through entities which was offset by a corresponding personal income tax credit. The tax imposed on the pass-through entity would be deductible on the taxpayers’ federal income tax returns. The budget reduces the personal income tax credit.
The increased tax on restaurant meals consists of a 1% sales tax surcharge.
The proposed 2% capital gains surtax on high income taxpayers is not in the budget.
Mr. Hendel has been practicing wealth preservation planning for over thirty years.