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What Is the Unified Tax Credit?
The unified tax credit, or unified transfer tax, is available to all U.S. taxpayers by the Internal Revenue Service (IRS) and combines two separate lifetime tax exemptions for gift and estate taxes. The combined exemption limit applies to taxable gifts you make to others during your lifetime, inter vivos gifts, and assets you leave to beneficiaries as 澳洲幸运5官方开奖结果体彩网:testamentary transfers.
Key Takeaways
- The unified tax credit defines a dollar amount that an individual can gift during their lifetime and pass on to heirs before gift or estate taxes apply.
- The tax credit unifies the gift and estate taxes into one tax that decreases the tax bill of the individual or estate, dollar for dollar.
- The lifetime gift and estate tax exemption for 2025 is $13.99 million for individuals and $27.98 million for married couples filing jointly. For 2024, it was $13.61 million and $27.22 million, respectively.
- For the tax year 2025, you can give up to $19,000 or $38,000 for spouses "splitting" gifts tax-free to recipients without reporting it to the IRS or using any of your lifetime gift and estate tax exemption. For 2024, the numbers were $18,000 and $36,000, respectively.
Understanding the Unified Tax Credit
Those who give substantial assets to others while living may face 澳洲幸运5官方开奖结果体彩网:gift taxes. Assets left for beneficiaries after death may be subject to 澳洲幸运5官方开奖结果体彩网:estate taxes. The unified tax credit sets an amount that individuals can gift during their lifetime and bequeath to heirs before any gift and estate taxes apply.
Important
The donor is responsible for paying the gift tax. However, the recipient may agree to pay the tax instead. If you are considering this type of arrangement, contact a tax professional for guidance.
The unified tax credit rolls the gift and estate tax exclusions into one tax system and decreases the individual's or estate's tax bill, dollar-for-dollar.
An individual or couple who gifts some of their assets may need to file a gift tax return if the value of the assets is higher than the annual exclusion amount. (In 2025, it's $19,000. In 2024, it was $18,000.) Gifts made to charities or to pay another person's medical or tuition expenses are exempt from gift tax return requirements.
Annual Gift Tax Exclusion
Most taxpayers can gift up to $19,000 in 2025 without notifying the IRS. (It was $18,000 in 2024.) The 澳洲幸运5官方开奖结果体彩网:annual exclusion is per person, so married couples filing jointly can gift up to $38,000 in 2025 without filing a gift tax return. (It was $36,000 in 2024.) If you give more than these amounts, you must 澳洲幸运5官方开奖结果体彩网:disclose the gift on Form 709. The value over this amount may count against your lifetime exemption. You won't have to pay gift taxes unless you exceed the lifetime amount, which is $13.99 million for individuals and $27.98 million for married couples filing jointly in 2025. (It was $13.61 million for individuals and $27.22 million for married couples filing jointly in 2024.)
Several types of transfers aren't subject to gift tax requirements:
- Gifts that are less than the year's annual exclusion in most cases
- Gifts to a spouse
- Payments that qualify for medical exclusion
- Qualified payments for tuition exclusion
- Transfers to political organizations
- Transfers to certain tax-exempt organizations
Important
According to the IRS, a gift is "any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return."
Federal Estate Tax Rates
The 2025 federal tax law applies the estate tax above $13.99 million. Individuals can pass $13.99 million to their heirs, and couples can transfer twice that without paying tax. For 2024, the exemption was $13.61 million for individuals and twice that for married couples filing jointly.
Only a small percentage of estates in the U.S. are worth more than these exemption thresholds. For those that are, federal estate tax rates apply to any amount above the exemption thresholds. The federal estate tax maxes out at 40% for taxable amounts above $1 million. Here's a look at how the tax accumulates as the taxable amount increases.
| Unified Rate Schedule | ||
|---|---|---|
| Taxable Amount | Estate Tax Rate | What Your Estate Owes |
| $0 - $10,000 | 18% | $0 base tax + 18% of taxable amount |
| $10,001 - $20,000 | 20% | $1,800 base tax + 20% of taxable amount |
| $20,001 - $40,000 | 22% | $3,800 base tax + 22% of taxable amount |
| $40,001 - $60,000 | 24% | $8,200 base tax + 24% of taxable amount |
| $60,001 - $80,000 | 26% | $13,000 base tax + 26% of taxable amount |
| $80,001 - $100,000 | 28% | $18,200 base tax + 28% of taxable amount |
| $100,001 - $150,000 | 30% | $23,800 base tax + 30% of taxable amount |
| $150,001 - $250,000 | 32% | $38,800 base tax + 32% of taxable amount |
| $250,001 - $500,000 | 34% | $70,800 base tax + 34% of taxable amount |
| $500,001 - $750,000 | 37% | $155,800 base tax + 37% of taxable amount |
| $750,001 - $1,000,000 | 39% | $248,300 base tax + 39% of taxable amount |
| Above $1,000,000 | 40% | $345,800 base tax + 40% of taxable amount |
Source: Internal Revenue Service
Unified Credits and Probate
The probate process can be expensive, so some people use the unified tax credit to save on estate taxes after their deaths. The credit is not used for reducing gift taxes during the individual's lifetime but instead used on the inheritance amount bequeathed to 澳洲幸运5官方开奖结果体彩网:beneficiaries after death.
To take advantage of this lifetime credit, beneficiaries or the decedent’s estate 澳洲幸运5官方开奖结果体彩网:executor must complete IRS Form 706, which is used to determine the estate tax imposed by Chapter 11 of the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Code (IRC).
Taxpayers can uꦏse the unified tax cred🐈it before or after death or both.
What Is the Gift Tax Exclusion for 2024 and 2025?
For 2024, the exclusion is $19,000. In 2024, it was $18,000. The annual amount you can gift to a spouse who is not a U.S. citizen is $190,000 in 2024. In 2024, it was $185,000.
What Is the Gift and Estate Tax Exemption for 2024 and 2025?
For 2024, the exemption is $13.99 million or $27.98 million if you're married and filing jointly. For 2024, the exemptions were $13.61 million and $27.22 million, respectively.
Which States Have an Estate Tax?
In addition to the federal estate tax imposed on all states, 12 states and the District of Columbia impose state estate taxes. At 20%, Hawaii and Washington have the highest top estate tax rates.
The Bottom Line
The unified tax credit is available to all U.S. taxpayers. The combined exemption limit applies to taxable gifts you make to others during your lifetime and assets you leave to beneficiaries. Taxpayers can gift up to $19,000 in 2025 without notifying the IRS. (It was $18,000 in 2024.) Taxpayers can use the unified tax credit before or after death or both.
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