By Jennifer J. Troyer, JD, Checkpoint News
On May 14, 2026, Connecticut Governor Ned Lamont signed the budget bill which includes some of the following tax changes: decoupling from certain IRC provisions, establishing new tax credits, expanding the back-to-school sales tax holiday, and making other changes. (L. 2026, S1 (Act 26-68), effective as noted.)
Income tax. Changes affecting income taxes include:
Applicable to income tax years beginning after 2025, IRC § 168(n) does not apply.
For income tax years beginning on or after January 1, 2022, the deduction under P.L. 119-21 (formerly known as the One Big Beautiful Bill or OBBB) Sec. 70302(f) is disallowed.
For income tax years beginning on or after January 1, 2025, and before January 1, 2026, the deduction under IRC § 174A is disallowed.
For income tax years beginning on or after January 1, 2022, and before January 1, 2026, any research or experimental expenditures paid or incurred for those income years must be deducted as allowed under IRC § 174, as in effect on July 3, 2025.
Applicable to income and taxable years beginning on or after January 1, 2026, an individual coverage health reimbursement arrangement tax credit for small businesses is created; the credit is up to $1,000 per covered employee.
Applicable to tax years beginning on or after January 1, 2026, certain pass-through entities may earn research and development tax credits.
Effective January 1, 2027, a personal income tax credit for caregiver costs is established.
Sales tax. Changes affecting sales and use taxes include:
Effective May 14, 2026, the back-to-school sales tax holiday limit is increased from $100 to $300 per item.
Effective May 14, 2026, the film and digital media production tax credits that may be claimed against the sales and use tax are extended to 2028.
Effective July 1, 2026, a sales tax credit, capped at $2 million per year, for the PeoplesBank Arena’s facility management company is created, subject to other requirements.
Property tax. Changes affecting property tax include:
Applicable to assessment years beginning on or after October 1, 2027, municipalities may exempt $50,000 of assessed value on primary residences that meet certain requirements.
Effective July 1, 2026, if East Haven or New Haven submit a request, an airport development zone surrounding Tweed New Haven Airport may be established for additional property tax exemptions.
Effective May 14, 2026, water pollution control authorities and municipalities may abate all or part of interest on delinquent property taxes owed by a common interest community, provided that certain requirements are met.
Other taxes. Changes affecting other taxes include:
Applicable to sales occurring on or after October 1, 2026, the cannabis total THC potency tax is replaced with an excise tax of 10.75% of the gross receipts from the sale of cannabis.
Effective July 1, 2026, the hospital provider tax is reduced.
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