How Recent Tax Changes Impact Your Wealth in Connecticut
If you have $500,000 or more in investable assets, the recently passed One Big Beautiful Bill (OBBB) may have more impact on your financial future than you realize. While many headlines focus on broader tax cuts and spending reforms, the fine print includes several provisions directly impacting high-net-worth individuals, especially those approaching or are already in retirement.
From expanded retiree deductions and adjustments to the SALT cap to enhanced estate tax thresholds and shifting income phaseouts, the OBBB brings both opportunity and increased complexity.
For Connecticut residents, these changes could lead to meaningful savings or trigger the need for urgent adjustments.
Understanding how to respond isn’t just about reacting to new rules; it’s about making more intelligent, tax-efficient decisions with the wealth you’ve worked so hard to accumulate. Whether you’re evaluating charitable giving, exploring tax-smart withdrawals, or reconsidering where and how to invest, this is critical for updating your current plan.
Heritage Capital, a fee-only fiduciary financial advisory firm in New Haven, CT, is here to help you understand what’s changed and what you can do to maximize the changes.
Connecticut’s Pension & Annuity Exemptions Are Expanding: Here’s What That Means for You
If you’re retired or approaching retirement in Connecticut, there’s good news: the state is gradually easing many residents’ tax burden on pension and IRA income.
- As of January 1, 2024, individuals with a federal adjusted gross income (AGI) of up to $100,000 (single) or $150,000 (married filing jointly) can begin exempting more of their retirement income from state taxes.
- In 2025, eligible retirees can exclude 75% of their IRA distribution income from Connecticut income taxes, increasing to a full 100% exemption in 2026.
- At the same time, the state is removing the requirement for automatic tax withholding on most pension and annuity payments.
- Starting in 2025, you’ll have more control over when and how you pay state taxes on retirement income.
What to do now: This phased rollout creates a strategic window to revisit your withdrawal plan. If you’re nearing retirement, it may be worth adjusting your income schedule or delaying certain distributions until the 100% exemption kicks in. A fee-only financial advisor in New Haven, CT, can help you run the numbers and structure your income plan to make the most of these new tax benefits.
The Federal SALT Deduction Is More Flexible: But Not Forever
For Connecticut residents used to high property and income taxes, the recently expanded federal SALT deduction brings some temporary, but welcome relief. Under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, the State and Local Tax (SALT) deduction cap has been significantly increased: up to $40,000 for joint filers and $20,000 for single filers, starting in tax year 2025.
However, this expanded deduction isn’t available to everyone. The higher cap begins to phase out for joint filers with adjusted gross incomes above $500,000, gradually reducing the benefit. After 2029, the cap reverts to the previous $10,000 limit unless new legislation is passed.
What to do now: If you’re a high-income earner in Connecticut, now may be the time to front-load deductible expenses such as property taxes or charitable contributions. For example, suppose you’re considering switching financial advisors or upgrading your investment and retirement strategy. In that case, a fee-only financial advisor in New Haven, CT, can help you maximize this limited opportunity.
The Federal Estate & Gift Tax Exemption Is Getting a Boost
A significant shift is on the horizon for high-net-worth families focused on legacy planning. Starting January 1, 2026, the federal estate and gift tax exemption will permanently increase to $15 million per individual, indexed annually for inflation. This substantially jumps from pre-2026 levels, creating a rare planning window for affluent individuals and families.
This higher exemption allows for more strategic wealth transfers, whether through outright gifts, trust structures, or family partnerships, without triggering federal estate or gift taxes. It also offers breathing room for those who haven’t formalized their legacy plans.
What to do now: Even though the increase doesn’t take effect until 2026, this is the right time to revisit your estate plan. Whether you aim to reduce future tax exposure or pass wealth more efficiently to the next generation, a skilled advisor can help you use tools like irrevocable trusts, lifetime gifting, and family limited partnerships to take full advantage of the expanded exemption.
If you’re considering changing financial advisors, this upcoming shift may be the right time to align your estate strategy based on the recommendations of a team of experienced high-net-worth retirement planning experts in Connecticut.
Seniors Get a Boost with a Higher Federal Deduction
Thanks to a new One Big Beautiful Bill Act (OBBBA) provision, retirees will see added tax relief starting in 2025. The legislation introduces an additional $6,000 standard deduction for individuals 65 and older, or $12,000 for married couples filing jointly. This increased deduction is available from 2025 through 2028 and is designed to ease the tax burden for older Americans living on fixed or semi-fixed incomes.
Notably, this benefit isn’t limited to those taking the standard deduction. Even if you itemize, you can still claim the additional senior deduction, providing more flexibility in structuring your tax strategy.
What to do now: If you’re 65 or older, this is a good time to re-evaluate your tax planning strategy. In some cases, switching from itemizing to taking the enhanced standard deduction could offer a better savings solution. You’ll also want to revisit Roth conversion strategies and retirement income sources to stay within income thresholds and avoid pushing yourself into a higher tax bracket.
A fee-only financial advisor in New Haven, CT, can help you fine-tune these decisions to better align with your retirement planning goals in Connecticut.
Connecticut Business Tax Rules Are Shifting: Here’s What Owners Should Know
Connecticut has introduced several tax changes that impact business owners and high-earning professionals operating in pass-through or corporate structures. These updates may offer new planning opportunities or signal the need for a closer look at your current tax strategy.
Since 2024, Connecticut has allowed eligible businesses to elect pass-through entity (PTE) tax treatment, a move designed to provide relief from the federal SALT deduction cap and bring greater tax parity to small business owners. At the same time, the state extended its 10% corporate surtax through 2028, continuing the added burden for larger corporations.
Starting in 2025, Connecticut will also lift the cap on Net Operating Loss (NOL) offsets for large corporate taxpayer groups, providing more flexibility in applying past losses to reduce future tax bills.
What to do now: If you own a business or generate income through a PTE, now is the time to evaluate whether electing PTE tax treatment could lower your combined federal and state tax liability. You should also review your overall entity structure to ensure it supports your long-term goals. A financial advisor familiar with Connecticut’s evolving business tax rules can help you assess the impact of these changes and make proactive adjustments.
Why Work with Heritage Capital?
As a fee‑only financial advisor in New Haven, CT, specializing in retirement planning for high-net-worth individuals, Heritage Capital offers:
- Deep Connecticut tax expertise
- Holistic retirement planning (including Connecticut retirement planning)
- Coordinate with your CPA on federal/state/international implications
- Strategic transitions when switching financial advisors
- Personalized, fiduciary-driven advice—no commission conflicts
Whether you’re adjusting income sources for tax efficiency, exploring PTE elections, or planning the legacy you leave behind, partnering with a team of professionals that understands both CT and high-net-worth financial needs is essential.
Contact us today to discuss how these changes impact your situation and to create a tailored tax-smart plan designed for your wealth goals.
