The Connecticut gift tax is the only standalone state-level tax on lifetime gifts in the country. It applies a flat 12% rate to cumulative taxable gifts above a $15 million lifetime exemption for 2026, and it requires a Connecticut return whenever a federal gift tax return is required, even when no tax is owed.1Justia Law. Connecticut Code Title 12 – Section 12-642 Rate of Tax2Connecticut Department of Revenue Services. Estate and Gift Tax Information If you live in Connecticut, own real estate or tangible property there, or plan a large gift to someone connected to the state, the rules below cover what triggers a return, how the tax is calculated, and how to stay out of penalty territory.
What Counts as a Taxable Gift
Any transfer above the annual per-recipient exclusion is a taxable gift for reporting purposes, whether or not any tax is ultimately due. For 2026 the annual exclusion is $19,000 per recipient.3Internal Revenue Service. Revenue Procedure 2025-32 You can give up to that amount to as many different people as you like each year with no reporting obligation at either the federal or state level. Anything above $19,000 to a single person begins counting against your lifetime exemption and must be reported.
Several categories of transfer are excluded entirely and do not count against either limit:
- Tuition paid directly to an educational institution, with no dollar cap. The payment must go to the school itself, not to the student. Room, board, books, and supplies do not qualify.4eCFR. 26 CFR 25.2503-6 – Exclusion for Certain Qualified Transfer for Tuition or Medical Expenses
- Medical expenses paid directly to a provider or insurer for someone else, also uncapped. If insurance later reimburses the expense, the exclusion is lost to the extent of the reimbursement.4eCFR. 26 CFR 25.2503-6 – Exclusion for Certain Qualified Transfer for Tuition or Medical Expenses
- Gifts to a U.S. citizen spouse, under the unlimited marital deduction. If your spouse is not a U.S. citizen, a higher annual exclusion of $194,000 applies for 2026 instead.5Internal Revenue Service. Frequently Asked Questions on Gift Taxes
- Gifts to qualified charities under Section 170(c) of the Internal Revenue Code.
The direct-payment rule for tuition and medical expenses is where donors most often lose the exclusion. A check written to your grandchild who then pays their university does not qualify. The check has to go to the institution.
The $15 Million Exemption and the 12% Rate
Connecticut’s lifetime exemption for 2026 is $15 million, mirroring the federal basic exclusion amount. The federal figure was set by the One Big Beautiful Bill Act, signed into law on July 4, 2025, which permanently raised the exclusion and eliminated the sunset previously scheduled for the end of 2025. It continues adjusting for inflation starting in 2027.6Internal Revenue Service. What’s New – Estate and Gift Tax Connecticut’s statute ties its own exemption to the federal amount, so the state threshold moved to $15 million automatically.1Justia Law. Connecticut Code Title 12 – Section 12-642 Rate of Tax
The math is cumulative. Every taxable gift you have made since January 1, 2005 is added together. Once that running total exceeds $15 million, each additional dollar is taxed at a flat 12%.2Connecticut Department of Revenue Services. Estate and Gift Tax Information Any Connecticut gift tax you paid in prior years is credited against the current calculation so the same dollars are not taxed twice. Connecticut also caps total lifetime gift tax at $15 million for gifts made on or after January 1, 2019.1Justia Law. Connecticut Code Title 12 – Section 12-642 Rate of Tax
The lifetime exemption is a single pool shared with the Connecticut estate tax. Heavy lifetime gifting reduces the shelter available for your estate at death.
Valuation is based on fair market value on the date the gift is complete. Cash is easy. Real estate, closely held business interests, artwork, and private company stock effectively require a qualified appraisal, because the Department of Revenue Services will challenge unsupported valuations.
Who Has to File a Connecticut Gift Tax Return
The Connecticut return is Form CT-706/709, a combined estate and gift tax form.7Connecticut Department of Revenue Services. Form CT-706/709 – Connecticut Estate and Gift Tax Return Line Instructions Both residents and nonresidents can be required to file, but the scope differs.
Residents must file if they made any gift of Connecticut real estate, any gift of tangible personal property located in Connecticut, or any gift of intangible property, and their Connecticut taxable gifts for the year exceed zero.2Connecticut Department of Revenue Services. Estate and Gift Tax Information Nonresidents file only if they gifted real estate or tangible personal property physically located in Connecticut. Intangibles like stocks and bonds are not subject to Connecticut gift tax for nonresidents.8Justia Law. Connecticut Code Title 12 – Section 12-644 Returns
There is one linkage worth understanding, because it catches donors who are nowhere near the $15 million line. If a federal Form 709 is required, the Connecticut return is also required, even if no Connecticut tax is due.2Connecticut Department of Revenue Services. Estate and Gift Tax Information A single $25,000 gift to one recipient exceeds the annual exclusion and triggers a federal filing obligation, which in turn triggers the Connecticut filing obligation for a resident donor.
What to Gather Before You File
Before starting the return, pull together:
- Social Security numbers for each donor and each recipient
- Legal descriptions of any real estate or business interests transferred
- Qualified appraisals for non-cash property
- Copies of every prior gift tax return filed since January 1, 2005
- The federal Form 709 for the same tax year, since the Connecticut return builds on the federal figures
Getting the prior-year history right is the piece that trips people up. One wrong cumulative figure will cascade through the calculation and either overstate or understate what you owe.
Deadline, Extensions, and Late Penalties
Form CT-706/709 is due by April 15 of the year following the calendar year of the gift.9Internal Revenue Service. Filing Estate and Gift Tax Returns You can file electronically through myconneCT or mail a paper return; if you mail it, use a method with delivery confirmation.
An automatic six-month extension of your federal income tax return also extends the federal gift tax return. If you are not extending your income tax return, you can request a separate six-month extension for Form 709 by filing Form 8892 on or before the original due date.10eCFR. 26 CFR 25.6081-1 – Automatic Extension of Time for Filing Gift Tax Returns Extensions cover the paperwork, not the payment. Any gift tax owed is still due April 15.
Late payment triggers a Connecticut penalty of 10% of the tax due (or $50, whichever is greater), plus interest at 1% per month from the original due date until payment is received.11Connecticut General Assembly. Connecticut General Statutes Chapter 228c – Gift Tax Interest accrues even when a valid extension is in place, because the extension applies only to filing. On a large balance, these charges compound quickly, so if the return will be late, estimate the tax and pay by April 15 anyway.
Married Couples: Gift Splitting and Portability
Spouses can elect to treat each gift as though it were made half by each of them, effectively doubling the annual exclusion to $38,000 per recipient. Both spouses must consent, and generally each must file a return that year.12Internal Revenue Service. Instructions for Form 709 (2025) Only the gift-making spouse needs to file if that spouse alone made gifts and no recipient received more than $38,000 in present-interest gifts. Gift splitting is unavailable if either spouse is a nonresident noncitizen.
When one spouse dies without using their full lifetime exemption, the survivor can claim the unused portion, called the deceased spousal unused exclusion or DSUE, and apply it to their own future gifts and estate before dipping into their own exemption.13eCFR. 26 CFR 25.2505-2 – Gifts Made by a Surviving Spouse Having a DSUE Amount Available Portability must be elected by the executor of the deceased spouse’s estate on the estate tax return. If the survivor remarries and that new spouse later dies, DSUE from the first deceased spouse is preserved only to the extent already applied to prior gifts.
What the Recipient Inherits: Carryover Basis
One consequence of gifting rather than bequeathing property changes whether the gift is actually a good idea. A recipient of a gift takes the donor’s original cost basis, not the property’s current value. This is called carryover basis.14Office of the Law Revision Counsel. 26 U.S. Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust An heir who inherits the same property at death generally receives a stepped-up basis equal to fair market value on the date of death.
If a parent bought stock for $50,000 and gifts it when it is worth $500,000, the recipient’s basis is $50,000. Selling immediately produces a $450,000 capital gain. Had the parent held the stock until death, the heir would take a $500,000 basis and owe nothing on an immediate sale. For highly appreciated assets, the income tax difference can dwarf any transfer tax savings.
If the donor actually pays gift tax on the transfer, the recipient’s basis increases by a portion of that tax, proportional to the appreciation built into the gift. The adjusted basis cannot exceed fair market value at the time of the gift.15eCFR. 26 CFR 1.1015-5 – Increased Basis for Gift Tax Paid The recipient also takes over the donor’s holding period, so property the donor held more than a year qualifies for long-term capital gains rates when the recipient sells.
A separate rule applies when the donor’s basis is higher than the property’s fair market value on the date of the gift. For calculating a loss on a later sale, the recipient uses the lower fair market value, not the donor’s higher cost.14Office of the Law Revision Counsel. 26 U.S. Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust Built-in losses cannot be shifted to the recipient.
What Filing Costs
A gift tax return is more complex than an ordinary income tax return, and preparer fees reflect that. Professional preparation generally runs roughly $400 to $2,000 depending on how many gifts are involved and how complicated they are. Real estate gifts require appraisals, typically $200 to $600 for standard residential property and higher for commercial parcels, large tracts, or unusual assets like artwork or closely held business interests. Budget for the appraisal separately from the preparer’s fee whenever a qualified appraisal is required.