A comprehensive understanding of the impact of the Cotton–Mouton effect on Faraday polarimetry measurements using counter-rotating circular polarization (CP) probe beams has been developed. By using the Jones theory, an analytic study shows that the Cotton–Mouton effect cancels to first order with coupling into the Faraday measurement only at higher orders. A Jones-based numerical study shows the coupling effect strongly depends on the Cotton–Mouton effect, Faraday effect, and wavelength chosen for the measurement. For realistic DIII-D plasma conditions and far-infrared wavelength, numerical calculation suggests the measurement is dominated by the Faraday effect while the coupling effect leads to a small but finite correction. By statistical comparison between the experimental measurement and the Jones-based numerical calculation under various plasma parameters, the impact of the Cotton–Mouton effect has been verified. Proper treatment of the coupling effect is essential in the data analysis under certain conditions for polarimetric measurement using CP in present devices and beyond.