How the One Big Beautiful Bill Impacts Connecticut 

It’s 870 pages long and significantly reshapes federal policy across many sectors of the U.S. economy. 

Here in Connecticut, the economic impact of the One Big Beautiful Act is expected to deliver a mix of industry investment, direct stimulus, and policy changes that will disproportionately impact our state in the years ahead—for better and for worse.  

CBIA’s Chris Davis, vice president of Public Policy, Whittlesey’s Brenden Healy, CPA, and CBIA Foundation director, Dustin Nord, dove into the bill’s details during an Aug. 5 webinar.  

They highlighted clear benefits for the state’s economy and budget, individuals, and businesses.  

They also addressed economic drags, such as higher state borrowing costs that could come from increased national debt, and areas where more clarity is needed from the federal government.  

Key Tax Changes, Incentives 

Also called the federal budget reconciliation bill, the OBBBA features sweeping changes to the federal tax code. 

To help boost spending in Connecticut from 2025 to 2029, the state and local tax deduction cap will increase from $10,000 to $40,000.  

This is significant for the state, Nord explained, because only about 10% of personal income tax filers who itemize currently take advantage of the deduction.  

“One strategy to consider is to accelerate property tax payments or restructure income to maximize the deduction before the SALT cap phases out.” 

Whittlesey’s Brenden Healy

With both high state and local taxes and high incomes in Connecticut, the overlap of individuals most likely to take advantage of the SALT cap increase to $40,000 is definitely disproportionate compared to the rest of the nation.  

Ultimately, that means more spending, especially in places like southwestern Connecticut.

The downside, Healy added, is that it’s a temporary measure and the benefit is capped at $500,000 for joint filers and $250,000 for single filers. 

“One strategy to consider is to accelerate property tax payments or restructure income to maximize the deduction before the SALT cap phases out,” he explained. 

Other Temporary Tax Reductions 

Middle to lower income individuals can also benefit from no tax on tips or overtime from 2025 to 2028. 

In industries that customarily include tips, like restaurants and hospitality venues, the deduction is up to $25,000.  

The deduction for overtime pay is up to $12,500 for a single filer and $25,000 for joint filers, and it only applies to excess pay over the regular rate of pay. 

The deduction for overtime pay is up to $12,500 for a single filer and $25,000 for joint filers. 

With an income phase out, the size of this stimulus is somewhat unknown, Nord said. 

The bill also includes temporary deductions up to $10,000 on interest for auto loans, and a $6,000 deduction for taxpayers age 65 or older. 

Additional guidance is expected from the Internal Revenue Service, including which new American autos are eligible. 

Business Tax Incentives 

Connecticut is one of the nation’s largest investors per employee of private investment in industrial spaces. 

The OBBBA introduces measures to support businesses, including expanded research and development expensing and the 100% bonus depreciation.  

These provisions are especially beneficial for Connecticut’s industrial sector, particularly biotech and advanced manufacturing. 

The OBBBA introduces measures to support businesses, including expanded research and development expensing.  

However, the decoupling of state tax law from federal law could limit the impact of these incentives within Connecticut. 

Among the business incentives: 

• For eligible assets placed in service after Jan. 19, 2025, 100% bonus depreciation is now permanent. This gives businesses across multiple sectors more cash to reinvest in equipment, facilities and hiring. 

• The limit for Section 179 Expensing has increased to $4.5 million.  

• Thousands of small businesses are expected to take advantage of a permanent 20  Qualified Business Income deduction for owners of pass-through entities and sole proprietorships. 

• Immediate deductions for domestic research expenses, retroactive for small businesses to 2022. 

• A retroactive deduction option for small businesses for 2022-2024 expenses. 

• The qualified Business Income deduction has been expanded and made permanent. 

Housing, Industrial Investment 

The bill permanently expands the low-income housing tax credit for builders, increasing it 12% per state, creating more opportunities for community investment.  

Significant investments are planned for defense manufacturing and maritime workforce development.  

The bill includes $250 million for training in defense manufacturing and $450 million in maritime workforce development and supply chain development, which puts Connecticut at a definite advantage, Nord said. 

However, guidance for allocating those funds has yet to be published. 

State Budget Pressures 

While the OBBBA represents significant opportunities for individuals and businesses, it also introduces considerable fiscal pressures and creates potential economic headwinds.  

The expected increased federal budget deficit will likely lead to higher interest rates, with anticipated new pressures on Connecticut’s state budget. 

The state’s $3 billion annual interest payments could increase, creating challenges for bond-funded capital programs and infrastructure projects. 

The expected increased federal budget deficit will likely lead to higher interest rates, with anticipated new pressures on the state budget.

Other challenges include potential reductions in Medicaid and Supplemental Nutrition Assistance Program funding.  

Cuts to Medicaid of an estimated $13 billion over 10 years could result in 100,000-200,000 fewer people covered by Medicaid, and cuts to SNAP could strain approximately 400,000 low- income participants. 

A new excise tax on large endowments, set at 21%, affects institutions like Yale, which rely heavily on endowment funds for research and development.

The tax could also reduce job growth in the biotech sector and impact venture capital investment. 

Energy Challenges 

Among a number of changes to clean energy funding, the bill eliminates solar and wind incentives, and New England is heavily reliant on expanded renewables for new power generation.  

In addition, the Energy Efficient Home Improvement Credit, originally due to expire after 2032, now expires Dec. 31, 2025.  

Healy recommended scheduling upgrades before the deadline and keeping receipts and certifications from contractors and manufacturers and purchasing clean vehicles before Sept. 30, 2025.