Unified Credit (Applicable Exclusion Amount)

 

 A credit is an amount that eliminates or reduces tax. A unified credit applies to both the gift tax and the estate tax. You must subtract the unified credit from any gift tax that you owe. Any unified credit you use against your gift tax in one year reduces the amount of credit that you can use against your gift tax in a later year. The total amount used during life against your gift tax reduces the credit available to use against your estate tax.

 

 Under prior law, the same unified credit amount applied to both the gift tax and the estate tax. Under current law, however, the unified credit against taxable gifts will remain at $345,800 (exempting $1 million from tax) through 2009, while the unified credit against estate tax increases during the same period. The following table shows the unified credit and applicable exclusion amount for the calendar years in which a gift is made or a decedent dies after 2003.

 

 

 

Unified Credit Federal Estate and Gift Tax

Year

For Gift Tax Purposes: Unified Credit

Applicable Exclusion Amount

For Estate Tax Purposes:
Unified Credit

Applicable Exclusion Amount

2004 and 2005

345,800

1,000,000

555,800

1,500,000

2006, 2007, and 2008

345,800

1,000,000

780,800

2,000,000

2009

345,800

1,000,000

1,455,800

3,500,000