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 against your gift tax reduces the credit
available to use against your estate tax.
Previously, the unified credit was $192,800, which eliminated taxes
on a total of $600,000 of taxable gifts and taxable estate. These
amounts were increased for gifts made, and for estates of decedents
dying, after 1997. The following table shows the unified credit and
the applicable exclusion amount for the calendar year in which a gift
is made or a decedent dies.
| Year |
Unified Credit |
Applicable
Exclusion
Amount |
| 1998 |
$202,050 |
$ 625,000 |
| 1999 |
211,300 |
650,000 |
| 2000 and 2001 |
220,550 |
675,000 |
| 2002 and 2003 |
229,800 |
700,000 |
| 2004 |
287,300 |
850,000 |
| 2005 |
326,300 |
950,000 |
| After 2005 |
345,800 |
1,000,000 |
For examples of how the credit works, see Applying the
Unified Credit to Gift Tax and Applying the Unified Credit
to Estate Tax, later.
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