General Assembly Raised Bill No. 5445 proposes significant amendments to the personal income tax regulations in Connecticut, particularly concerning the treatment of amortizable bond premiums and various income sources. The bill repeals subparagraph (B) of subdivision (20) of subsection (a) of section 12-701 and replaces it with new provisions effective January 1, 2027. The new language allows taxpayers to subtract the amortizable bond premium for the taxable year on any bond whose interest is subject to state tax but exempt from federal income tax, provided these premiums are not deductible in determining federal adjusted gross income. Additionally, the bill removes the previous provision that included the amortizable bond premium in ordinary and necessary expenses for tax deductions, indicating a shift in how these premiums are treated.

Furthermore, the bill introduces a tiered deduction schedule based on federal adjusted gross income (AGI) for various income sources, including pension and annuity income, Social Security benefits, and distributions from individual retirement accounts (IRAs). For individuals with an AGI under $75,000, a 100% deduction on pension income will be available starting in 2024, with decreasing percentages for higher income levels. The bill also establishes provisions for first-time homebuyer savings accounts, allowing eligible individuals to deduct contributions and accrued interest from gross income. Overall, Raised Bill No. 5445 aims to provide tax relief and clarify tax implications for lower and middle-income taxpayers while promoting savings for retirement and homeownership, with many changes set to take effect on January 1, 2027.