How are life insurance proceeds taxed in Connecticut?

Life insurance proceeds in Connecticut are not subject to state income tax, which aligns with the principle that death benefits received by beneficiaries from a life insurance policy are typically exempt from income taxation. This tax treatment exists to provide financial support to beneficiaries without imposing additional tax burdens during a time of loss. Therefore, when a policyholder passes away and the death benefit is paid out to the designated beneficiaries, they receive the full amount of the proceeds without any state income tax deductions. This advantage makes life insurance a beneficial financial tool for estate planning and providing for loved ones after an individual's death.

As a part of planning, it's important for insured individuals to understand that while premiums paid for life insurance are not tax-deductible, the benefits derived from such insurance plans can provide significant relief to their heirs without additional tax liabilities, ensuring that the intended support is fully realized.