There is an estate tax in Connecticut. As of 2023, there is a flat estate tax rate of 12%. If you’re a resident of Connecticut and thinking about planning your estate, this guide will explain what you need to know about the estate tax to make sure your affairs are in order when you pass away. If the estate tax may apply to you, consider finding a financial advisor to guide you through the estate planning process. SmartAsset can help you find an advisor with our free financial advisor matching service.
Connecticut Estate Tax Exemption
Connecticut is one of 12 states, plus the District of Columbia, that imposes an estate tax.While the vast majority of families aren’t affected by thefederal estate tax (because of how high the exemption is), Connecticut’s estate tax affects a greater proportion of estates.For estates of people who died in 2022, the tax won’t apply if the estate is less than $9.1 million. As of 2023, the Connecticut estate tax exemption will match the federal exemption of $12.92 million. The estate tax is due within six months of the estate owner’s death, though a six-month extension may be requested.
The estate tax rate used to be progressiveand payable on the value of the entire taxable estate. The tax rate ranged from 11.6% to 12% for 2022. In 2023, there will be a flat rate of 12%.
Connecticut Estate Tax Rate
Connecticut’s estate tax used to be progressive, with a series of increasing rates applying as the value of the estate gets higher.You can find your taxable estate bracket in the chart below for 2022.
If, for instance, you have an estate worth $10 million and you died in 2022, your taxable estate after the exemption is $900,000. All of that falls in the first bracket, so your tax rate is 11.6%. That means your total estate tax burden is $104,400.
CONNECTICUT ESTATE TAX RATES 2022
| Taxable Estate* | Marginal Rate |
| Up to $9.1 million | 0% |
| $9.1 million to $10.1 million | 11.6% |
| $10.1 million and above | 12.6% |
*The taxable estate is the total above the exemption of $9.1 million
Starting in 2023, the exemption for the estate tax will increase to $12.92 million and there will be a flat rate of 12% for the total estate above that exemption.
What Is the Estate Tax?
The estate tax is a tax applied to an estate after a person dies but before the person’s money gets passed on to heirs. It is sometimes called the “death tax.” Only estates that reach a certain threshold are subject to the estate tax.
The estate tax is not the same as the inheritance tax, which is levied after the estate is dispersed to a person’s beneficiaries. While the estate tax is taken out of the estate, the beneficiaries are responsible for paying the inheritance tax.
Connecticut Inheritance Tax
There is no inheritance tax in Connecticut. However, another state’s inheritance tax may apply to you if your grantor lived in a state that has an inheritance tax. In Kentucky, for instance, the inheritance tax applies to all in-state property, even if the inheritor lives in another state. If someone who lives out-of-state leaves you something, make sure to check the local laws in your grantor’s state to see if you owe inheritance tax.
Connecticut Gift Tax
Connecticut is the only state in the union that levies its own gift tax. The lifetime exemption is equal to the estate tax exemption. There is also a yearly exemption of $15,000 per person per year.
The federal gift tax also has an exemption, which is $16,000 in 2022 and $17,000 in 2023. The federal lifetime exemption is $12.92 million as of 2023.
Connecticut Estate Tax for Married Couples
Connecticut does not have portability for spouses. When the second spouse of a married couple dies, only one exemption applies.
Federal Estate Tax
There is a federal estate tax that may apply on top of the Connecticut estate tax, but it has a higher exemption level of $12.06 million in 2022. This exemption is portable between spouses. This means a couple can protect up to $25.84 million with proper legal steps.
The top tax rate for the federal estate tax is 40%. Using the same method described above, you can find your federal estate tax burden within the table below.
FEDERAL ESTATE TAX RATES
| Taxable Estate* | Base Taxes Paid | Marginal Rate | Rate Threshold** |
| $1 – $10,000 | $0 | 18% | $1 |
| $10,000 – $20,000 | $1,800 | 20% | $10,000 |
| $20,000 – $40,000 | $3,800 | 22% | $20,000 |
| $40,000 – $60,000 | $8,200 | 24% | $40,000 |
| $60,000 – $80,000 | $13,000 | 26% | $60,000 |
| $80,000 – $100,000 | $18,200 | 28% | $80,000 |
| $100,000 – $150,000 | $23,800 | 30% | $100,000 |
| $150,000 – $250,000 | $38,800 | 32% | $150,000 |
| $250,000 – $500,000 | $70,800 | 34% | $250,000 |
| $500,000 – $750,000 | $155,800 | 37% | $500,000 |
| $750,000 – $1 million | $248,300 | 39% | $750,000 |
| Over $1 million | $345,800 | 40% | $1 million |
*The taxable estate is the total above the exemption of $12.92 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Connecticut Tax Picture
Connecticut is nottax-friendly for retirees. In fact, it ranks among the least tax-friendly states in the country for those in their golden years. The state fully taxes withdrawals from retirement accounts, like IRA or401(k) plans, as well as payments from private or public pension plans. It also taxes Social Security. However, seniorswho have an adjusted gross income below $75,000 ($100,000 for joint filers) are exempt from Social Security taxes.Connecticut’s income tax rate ranges from 3.00% to 6.99%.
The average property tax rate in Connecticut is 1.96%, among the highest in the country. That said, seniors age 65 and over who own and occupy a Connecticut home are eligible for a property tax circuit breaker of upto $1,250 for married couples or $1,000 for individuals.
Sales tax is 6.35% throughout Connecticut. There are no local sales taxes.
Estate Planning Tips
- Estate planning, in Connecticut or elsewhere, takes time and knowledge. If you need some help, you should consider finding a financial advisor to guide you through the process. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Estate planning is easier if you know what your portfolio and savings are going to look like in your later years. You can use our retirement calculator to see how much you are likely to have in retirement.
- A common misconception about estate planning is that it’s only for older people or rich people. This couldn’t be further from the truth. A solid estate plan can help protect you financially if the unexpected were to occur.
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Given the extensive article provided on Connecticut's estate tax and related topics, I can provide a comprehensive breakdown and clarification on each of the concepts discussed, backed by my knowledge in this domain.
Connecticut Estate Tax
1. Connecticut Estate Tax Rate (2023):
As of 2023, Connecticut imposes a flat estate tax rate of 12% on estates that exceed the exemption amount. This is a change from the progressive rates that existed in previous years.
2. Connecticut Estate Tax Exemption:
Connecticut's exemption threshold has increased to match the federal exemption, which stands at $12.92 million as of 2023. This means if your estate is valued below this amount, you won't owe any Connecticut estate tax.
3. Due Dates and Extensions:
The estate tax in Connecticut is typically due within six months following the estate owner's death. However, there's an option to request a six-month extension if necessary.
What is the Estate Tax?
The estate tax, often referred to as the "death tax," is a levy imposed on an estate after an individual's death but before the assets are passed on to the heirs. It's distinct from the inheritance tax.
Connecticut Inheritance Tax
Connecticut does not have an inheritance tax. However, if you're a resident of another state with an inheritance tax, you might still be subject to that state's rules, depending on where the grantor lived.
Connecticut Gift Tax
Interestingly, Connecticut is unique in levying its own gift tax. The exemption amount aligns with the estate tax exemption, and there's an additional annual exemption of $15,000 per person as of the latest available data. This is different from the federal gift tax exemption, which has separate figures for 2022 and 2023.
Connecticut Estate Tax for Married Couples
Unlike some jurisdictions, Connecticut doesn't offer portability for spouses. This means that when the second spouse passes away, only one exemption applies, potentially leading to a higher tax liability for the heirs.
Federal Estate Tax
On top of the state estate tax, there's also a federal estate tax with a different exemption threshold and rate structure. As of 2022, the federal exemption was $12.06 million, and the top tax rate was 40%. However, it's essential to understand that the federal exemption is portable between spouses, offering some planning opportunities.
Connecticut's Overall Tax Landscape
Connecticut is often considered less tax-friendly for retirees compared to other states. The state taxes retirement account withdrawals, pension payments, and even Social Security for certain income levels. However, there are provisions like property tax breaks for seniors, emphasizing the importance of holistic tax planning.
Estate Planning Tips
Estate planning is not just for the wealthy or older individuals; it's a crucial aspect of financial planning for many people. Utilizing tools like SmartAsset can help individuals find suitable financial advisors to guide them through this intricate process. Furthermore, understanding one's financial standing, utilizing resources like retirement calculators, and debunking common misconceptions about estate planning are all essential steps in ensuring one's affairs are in order.
To conclude, navigating Connecticut's estate tax system requires a nuanced understanding of state-specific regulations, federal implications, and broader tax planning considerations. Whether you're a resident or have assets in the state, proactive planning and consultation with financial professionals can help optimize your estate strategy.
