Unified Credit refers to a tax credit in the United States that allows taxpayers to offset the federal estate and gift tax liability. It is a key component of the estate planning process and enables individuals to transfer a certain amount of wealth without incurring taxes.
The unified credit is linked to the lifetime exemption limit, which is the amount that can be transferred during a taxpayer’s lifetime or at death without incurring federal estate or gift taxes. For example, if the lifetime exemption amount is set at $11.7 million (as it was for 2021), an individual can transfer up to that amount without incurring tax consequences. Beyond this limit, the estate or gift tax will apply.
This credit effectively unifies the treatment of estate and gift taxes, allowing taxpayers to utilize the same exemption amount for both types of transfers. It is important for taxpayers to stay informed about changes to the exemption limits, as these can vary with new tax laws and inflation adjustments.
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