Connecticut Estate and Gift Tax 2026: $15M Exemption, 12%, Cap

What the law says in 2026

Of the thirteen estate-tax jurisdictions on our state hub, Connecticut is the one we found that also runs its own gift tax on the same schedule (our reading). The two taxes share one $15,000,000 exemption in practice: gifts that were taxable for Connecticut count against it, and so does the estate.

“Federal basic exclusion amount” is defined in the statute as the figure the IRS publishes each year, so Connecticut moved from $13,990,000 on the 2025 return instructions to $15,000,000 on the 2026 ones with no vote of its own. Rev. Proc. 2025-32 states that the Act raised the figure “to $15,000,000 for calendar year 2026” and that it is indexed from 2027 on. The next Connecticut threshold therefore depends on a revenue procedure that the IRS had not yet published when we wrote this.

How the Connecticut taxable estate is built

The 12-391(c)(1)(C) definition has three parts, and they are the reason lifetime gifts do not simply disappear from the calculation.

• The federal gross estate less federal deductions, with the federal deduction for state death taxes disregarded.
• Plus Connecticut taxable gifts made since January 1, 2005, other than gifts that are already in the federal gross estate.
• Plus Connecticut gift tax paid by the decedent or the decedent’s estate on a gift made by the decedent or the spouse in the three years before death. The DRS instructions say the date of the gift, not the date the tax was paid, decides whether it counts.

Then the tax comes from the table, a credit is taken for Connecticut gift tax paid since 2005 (limited to the tax), a reduction is taken for out-of-state real and tangible property (residents only), and the result is limited by the cap. One more reduction exists for money kept ten years in certain Connecticut Innovations private investment funds: half of the amount invested, up to $5,000,000 per decedent and $30,000,000 in total for all estates (12-391(i)).

Tax by size of estate

The table assumes no earlier Connecticut gifts and ignores the Innovations reduction. The federal estate tax is a separate layer on top; our federal estate tax guide explains it, and the state hub shows where the other twelve estate-tax jurisdictions start. New York’s cliff is a very different design; see our New York estate tax calculator.

Gift first, die later: six cases

Take a Connecticut resident who holds $30,000,000 in cash and funds, makes the gift in 2026 and dies later. Everything is in cash or at a fixed value unless a case says otherwise, annual exclusions are ignored, and the gift tax is paid out of what the donor keeps (our arithmetic).

What the cases show:

• A gift under the exemption does nothing for Connecticut tax (Case 2). It only uses up exemption that the estate would have used anyway.
• Paying the gift tax early saves 12% of the tax paid (Case 3). The tax is calculated on the gift, but it is not itself part of the base, so moving $600,000 out of the estate removes $72,000 of estate tax. Dying inside three years cancels that saving (Case 4).
• The real saving is growth after the gift (Cases 5 and 5b): the Connecticut base uses the value on the date of the gift, so $10 million of later appreciation is out of the state base. Here the total tax falls from $3,000,000 to $1,728,000 (our arithmetic). Federal rules push the other way, because a gift carries the donor’s basis instead of getting a step-up; our annual gift exclusion guide and step-up in basis guide cover that trade.
• The cap is a ceiling on the total (Case 6): $5,400,000 paid as gift tax leaves $9,600,000 of room, and the lifetime total stops at $15,000,000.

The $15 million cap, read carefully

The estate section says “In no event shall the amount of tax payable under this section exceed fifteen million dollars,” and then lowers that limit by Connecticut gift tax paid on gifts made on or after January 1, 2016, including gift tax paid by the decedent’s spouse on gifts that are in the gross estate (12-391(d)(1)(E)). The gift section has its own matching ceiling on the total gift tax from 2016 (12-642(c)(2)). From 2016 through 2018 the figure was $20,000,000; it became $15,000,000 for 2019 and later.

The Department of Revenue Services adds one sentence worth reading: “Note that a donor’s prior year gift tax liability is not reduced as a result of the $15 million cap.” In plain terms, gift tax already paid stays paid; the cap works by limiting the estate tax that is still to come.

The cap is a fixed statutory dollar amount while the exemption follows the IRS figure, so from 2027 the taxable estate at which the cap binds will drift upward with the exemption: $125,000,000 above whatever the exemption is (our arithmetic).

Rentals and fund interests: residents and nonresidents

Two different rules apply depending on where the owner lives and whether the asset is a building or an interest in an entity.

For a resident, Connecticut may levy the tax on “intangible personal property included in the gross estate of the decedent, regardless of where it is located” (12-391(d)(3)). That is why a deeded out-of-state building lowers the tax and an LLC or fund interest that owns the same building does not, on our reading. The state also taxes a resident’s gift of an intangible anywhere, but not a gift of real or tangible property located outside Connecticut (12-643(3)); Form CT-706/709 even denies the annual exclusion on the first $19,000 to a donee if that gift is out-of-state real or tangible property. A direct deed of an out-of-state rental to a child is therefore outside the Connecticut gift tax, while a gift of units of the LLC that owns it is inside.

For a nonresident, the state reaches real and tangible property in Connecticut. The statute disregards a partnership, S corporation or disregarded single member LLC in three cases: the entity “does not carry on a business for the purpose of profit and gain,” the ownership “was not for a valid business purpose,” or the property was acquired other than by a bona fide sale for full consideration and the decedent retained a power or interest that keeps it in the federal gross estate. Whether a real estate fund or syndication with several investors fits one of those cases is a question for a Connecticut attorney; the DRS instructions for Schedule G say the property is then counted “in proportion to the decedent’s constructive ownership.”

An estate that must file and holds Connecticut real property has one more step: before selling it, the attorney or corporate fiduciary must apply on Form CT-4422 UGE for release of the estate tax lien (12-398(d); DRS tax information page). Our probate guide covers the court process that runs alongside.

Spouses and the threshold history

The text of 12-391 we read contains no portability election. What it does have is a Connecticut-only QTIP election: the executor may elect on Form CT-706/709 to treat property as QTIP for Connecticut purposes if no federal election was made (12-391(f); DRS line instructions). Our credit shelter trust and QTIP guide explains the federal design.

What a reader can do with this

What you can check before talking to anyone:

• Add up your Connecticut base. Include the home, rentals, fund and LLC interests, retirement accounts, insurance you own and cash, less debts and deductions, and add every Connecticut taxable gift since 2005. If the total is under $15,000,000 the state tax is zero, though a return or a Probate Court form is still filed.
• Sort each asset by where it sits and how it is titled. A deed to an out-of-state building lowers a resident’s tax; an LLC interest does not. For a nonresident, a Connecticut rental in a business LLC may fall outside; one in a shell may not.
• List past gifts. Every Connecticut taxable gift since 2005 is on Schedule B of the return, and gift tax paid since 2016 reduces the cap.
• Mind the three-year window and the date. A gift made now is clear of the add-back only if the donor lives past it, and 2026 gifts must be on a return by April 15, 2027 even when no tax is due.
• Compare the bill with the cash. The estate tax is due six months after death; a building or fund interest may take longer to sell or redeem.

The decision, and who makes it. The estate plan, any gift and the Form CT-706/709 are the work of a Connecticut estate-planning attorney and a CPA; appraisals of real estate and entity interests come from credentialed appraisers. A financial adviser’s part is how a gift or the tax bill would be paid and what it does to the rest of the balance sheet. Nothing here is a recommendation to give, hold or sell anything.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources, read and saved on October 22, 2026: Connecticut General Statutes chapter 217 (sections 12-391 and 12-392, with 12-398(d) as cited by the Department of Revenue Services) and chapter 228c (sections 12-640 to 12-647), cga.ct.gov, current edition; Connecticut Department of Revenue Services, Estate and Gift Tax Information page, and the Form CT-706/709 line instructions (Rev. 06/26 for 2026 and Rev. 06/25 for 2025); Rev. Proc. 2025-32 (irs.gov). The 2027 federal exclusion amount had not been published when we wrote this. We did not read the Connecticut Probate Court forms, Connecticut Innovations program rules or any Connecticut case law, and the LLC and fund readings are ours. The tax grid, the six gift cases and the property cases are our arithmetic. This is analysis of public documents, not investment, legal or tax advice.