Office of State Treasurer
Denise L. Nappier
A Tax Deduction for Families Saving for College With CHET!
Connecticut State Income Tax Deduction
for Contributions to CHET
Citing the need to help Connecticut remain competitive with other states in
serving the needs of families striving to achieve a solid future for their
children, State Treasurer Denise L. Nappier proposed legislation in February
2006 to create a state income tax deduction for contributions to the state’s 529
college savings program, CHET.
Analysis by Office of Legislative Research (Connecticut General Assembly)
The new law will allow taxpayers to deduct contributions to the Connecticut Higher Education Trust (CHET), which is Connecticut's state-sponsored 529 college savings plan, from their Connecticut adjusted gross income for state income tax purposes. It limits annual CHET deductions to $5,000 for single filers and $10,000 for joint filers. It allows taxpayers to carry forward any unused deductions for the five following years as long as each deduction does not exceed the annual maximums.
Check out photos from the CHET tax deduction announcement!
Effective Date: July 1, 2006 and applicable to tax years starting on or after January 1, 2006.
State Budget Impact: The bill is anticipated to result in a General Fund revenue loss to the Personal Income Tax of $6. 6 million in FY 07 and $7. 5 million in FY 08.
If you wish to review the statutory language for the CHET Tax Deduction, click here.
More About CHET
The new CHET tax deduction builds on a series of improvements made to the CHET program during the Nappier Administration, and further encourage families to save regularly for the ever-increasing costs of higher education. CHET has approximately $700 million in assets in nearly 50,000 accounts, compared with just over 4,000 accounts and $18 million in assets when Treasurer Nappier took office in 1999.
The CHET program now offers five investment options for account owners, depending upon their tolerance for risk and their investment preferences.
A CHET account may be opened with as little as $25, and can be made using automatic deposit from checking or savings accounts or payroll deduction through participating employers. More than 400 Connecticut businesses and numerous municipalities offer payroll deduction for CHET contributions to their employees. A CHET account can be opened by any individual, including a grandparent, family friend or neighbor. Withdrawals used for qualified expenses, including tuition, room and board, are free of both federal* and CT income taxes.
The CHET program web site www.aboutchet.com, offers on-line enrollment and
describes the range of CHET investment options.
law allowing federal tax-free qualified withdrawals is set to expire on December