What Is the Unified Tax Credit?

The Lifetime Gift Tax Exclusion

By law, individuals may give a certain amount in tax-free gifts during their lifetime. These gifts might include money, property, or stocks. The amount you can give tax-free is your lifetime exclusion, and once you exceed that amount you must pay taxes on the gifts you give. The annual exclusion amount for 2020 is $15,000 per person.

The Unified Tax Credit

Individuals who gift large amounts while still living may be required to pay the gift tax, and assets left to beneficiaries may be subject to estate tax. The unified tax credit has a set amount that an individual can gift during their lifetime before becoming subject to any gift or estate taxes. The unified tax credit is designed to decrease the tax bill of the individual or estate. It can be used by taxpayers before or after death, integrates both the gift and estate taxes into one tax system, is adjusted for inflation, and has no income limit. The lifetime gift tax exclusion in 2020 is $11.58 million, meaning the federal tax law applies the estate tax to any amount above $11.58 million.

Beneficiaries or estates that wish to take advantage of this lifetime credit must complete IRS Form 706.

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Do you have questions about the lifetime gift tax exclusion or the unified tax credit? We are here to help. Please contact us at (914) 228-7448 for a free consultation.

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