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HB 5144

AN ACT ESTABLISHING A PERSONAL INCOME TAX DEDUCTION FOR CERTAIN PAYMENTS RECEIVED FROM AN INSURANCE COMPANY.

2025 Regular Session Introduced by Mike Demicco and 1 co-sponsor

Connecticut bill creates state income tax deduction for certain insurance company payments, reducing taxable income for qualifying recipients while decreasing state tax revenue.

PUBLIC HEARING 0226
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Bill Summary · HB 5144

Legislative bill overview

HB 5144 would establish a personal income tax deduction for certain payments received from insurance companies in Connecticut. The bill allows taxpayers to exclude specific insurance payouts from their state taxable income, effectively reducing their tax liability on these funds. The legislation is currently in the Finance, Revenue and Bonding Committee after a public hearing was held in late February.

Why is this important

Insurance proceeds are typically already excluded from federal taxable income in most circumstances, but state tax treatment varies. This bill addresses whether Connecticut residents should receive similar relief at the state level, which could affect how residents are taxed on life insurance, disability insurance, or other insurance settlements. The fiscal impact on state revenue and the fairness of the deduction to different taxpayer groups depends on which specific insurance payments qualify.

Potential points of contention

  • Scope ambiguity: The bill's language regarding "certain payments" is vague—it's unclear which insurance products qualify (life insurance, disability, property/casualty, health insurance reimbursements), potentially creating confusion and unequal treatment
  • Revenue impact: Expanding tax deductions reduces state income tax revenue; lawmakers must weigh this against other budget priorities without clarity on the fiscal cost
  • Equity concerns: The deduction may primarily benefit higher-income individuals who receive larger insurance settlements, while providing minimal benefit to lower-income taxpayers

Compiled from official sources — confirm details with the bill’s official record.

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