I am confused with the CT Income Tax Adjustment. I have itemized by deductions and it is capped at 10,000. Do I need to enter the CT Taxes withheld in my W-2? The explanation given is very confusing.

Yes. Enter your state withholding on Box 17 of the W-2 screen just as it appears on your W-2 form. Otherwise you will not receive credit on Connecticut.

Do not add state withholding a second time anywhere else. TurboTax carries the Box 17 amount to all the right places.

The $10,000 limit is a federal limit. Connecticut does not use itemized deductions.

So my question is, do I need to add this amount (Box 17 of the W-2) back in my CT Income Tax Return? That is what I am having a hard time understanding.  It states that if it was used in the Itemized Deductions section then we need to add that same amount back.  If I do this, my income will appear higher than it was.

No, do not add the amount in Box 17 of the W-2 into the CT Income Tax Return.   This information TurboTax will pull the Box 17 amount into the return automatically.