Losing a loved one is never easy. Between handling funeral arrangements, dealing with emotions, and settling personal affairs, understanding how taxes impact what is left behind can feel overwhelming. In Connecticut, one key topic families often face is the CT inheritance tax and how it applies when transferring wealth or property after death.
Knowing the difference between inheritance tax and estate tax, as well as how the Connecticut system works, can help you avoid costly mistakes and plan the best way forward.
Understanding the CT Inheritance Tax
Connecticut does not currently impose a true inheritance tax. Instead, it has an estate tax, which is paid by the estate of the deceased before assets are distributed to beneficiaries. This means heirs do not directly pay taxes on what they inherit. The estate itself settles any tax obligations with the state before the inheritance is passed along.
The Connecticut estate tax applies only to estates valued above a certain threshold. As of 2025, the exemption amount is $13.61 million, matching the federal estate tax exemption. This means that if the total value of the deceased person’s estate is under that limit, no Connecticut estate tax will be due. However, estates that exceed the exemption amount will owe taxes on the value above that threshold.
It’s important to note that the exemption amount can change from year to year based on legislation. For estates exceeding the exemption limit, tax rates range between 10% and 12%. If you are administering an estate in Connecticut, it’s wise to verify the current threshold before filing returns.
Difference Between Estate Tax and Inheritance Tax
The distinction between an inheritance tax and an estate tax is critical. An inheritance tax is paid by the person who receives the assets, while an estate tax is paid from the estate before distribution. Connecticut used to have an inheritance tax, but it was repealed in 2011. Today, only the estate is taxed, and beneficiaries typically do not pay taxes on what they receive.
This setup is beneficial to most Connecticut residents, especially when compared to states that still impose inheritance taxes. In states with an inheritance tax, the relationship between the deceased and the heir determines how much tax is owed. Connecticut’s estate-based system simplifies this process by ensuring taxes are paid before the estate is distributed.
Who Needs to File a Connecticut Estate Tax Return
If the total gross estate value exceeds the Connecticut exemption amount, a Connecticut estate tax return (Form CT-706/709) must be filed with the Department of Revenue Services. The executor or personal representative of the estate is responsible for this filing.
The estate includes all property the deceased owned at the time of death, such as real estate, investments, vehicles, business interests, retirement accounts, and personal belongings. Even if property is located outside Connecticut, it must still be included in the calculation if the decedent was a Connecticut resident.
For nonresidents who owned property in Connecticut, the estate may still be subject to CT estate tax on the Connecticut-based assets only. Real estate, for example, would fall into that category even if the owner lived elsewhere.
Federal Estate Tax Considerations
In addition to the Connecticut estate tax, large estates may also be subject to federal estate tax. The federal exemption amount is currently aligned with Connecticut’s at $13.61 million. However, that number is expected to decrease significantly in 2026 unless new legislation is passed. If it reverts to the pre-2018 threshold, many more estates could become taxable.
When both federal and state estate taxes apply, the estate’s executor must file separate tax returns for each. Connecticut allows a credit for federal estate taxes paid, which helps avoid double taxation. Still, the process can be complicated, so working with a tax attorney or financial advisor experienced in CT inheritance and estate tax matters is highly recommended.
Gift Tax and Lifetime Transfers in Connecticut
Connecticut is the only state that currently imposes a state-level gift tax. This means large gifts made during a person’s lifetime count toward their lifetime estate and gift tax exemption. If someone gives more than the annual federal gift tax exclusion (currently $18,000 per recipient in 2025), those gifts reduce the exemption amount available when they pass away.
For example, if someone gives $1 million in taxable gifts during their lifetime, that $1 million counts against the $13.61 million estate tax exemption. Understanding this connection between lifetime gifts and estate taxes is crucial for effective estate planning.
How Real Estate and Property Transfers Are Affected
Real estate is one of the most common assets affected by Connecticut estate taxes. If the deceased owned a home in Connecticut, its fair market value at the time of death is included in the total estate valuation. This includes not only primary residences but also vacation properties, investment homes, and land parcels.
If you inherit a property, you typically receive it with a “stepped-up basis,” meaning its taxable value for future capital gains is reset to its fair market value on the date of death. This significantly reduces potential capital gains taxes if you later sell the property. However, if the property pushes the estate above the exemption limit, estate taxes could still apply.
How to Minimize CT Inheritance and Estate Tax Burden
Although Connecticut imposes an estate tax, there are several ways families can plan ahead to minimize or eliminate the tax burden. Common strategies include creating trusts, making annual tax-free gifts, or transferring ownership interests over time to reduce the total estate value. Life insurance policies placed in irrevocable trusts can also help heirs cover taxes without selling inherited assets.
Another effective option for those who have inherited real estate is to sell the property directly for cash to a trusted buyer like Neighbor Joe.
Selling the house can simplify the estate settlement process, eliminate ongoing maintenance costs, and provide liquid funds to settle taxes or distribute among beneficiaries. Neighbor Joe buys homes as-is, covering all closing costs with no fees or commissions. That means you get to focus on settling the estate without additional stress.
Working With Professionals for Guidance
Administering an estate is a significant responsibility, and the rules surrounding CT inheritance tax can be confusing.
Executors, heirs, and families benefit from consulting experienced professionals, including estate attorneys, certified public accountants, and local home buyers familiar with Connecticut’s property laws. Together, they can ensure all documents are filed correctly, deadlines are met, and the estate is distributed in compliance with state and federal regulations.
Understanding how estate tax works helps families protect their loved one’s legacy and ensure that the estate settlement process goes smoothly. Whether you are handling a large estate or a modest family home, getting the right advice early can save time, money, and unnecessary stress.
Sell Your Inherited Connecticut Home to Neighbor Joe
If you’ve inherited a home in Connecticut and want to simplify the process, Neighbor Joe can help. We buy houses in any condition, offering fast cash offers and flexible closing timelines. There’s no need to clean, repair, or list the property.
Our local team provides fair offers based on your home’s value, and we handle all closing costs. Selling your inherited home for cash can make managing the CT inheritance tax process much easier and help you move forward without financial strain. Contact Neighbor Joe today for a no-obligation quote and close in as little as seven days.