Legal Definitions - unified credit

Unified credit is a tax credit that is applied against the federal unified transfer tax. This credit is also known as the unified estate-and-gift tax credit. It is a dollar-for-dollar reduction of the total tax liability, as opposed to a deduction from gross income.

For example, if a person owes $10,000 in federal taxes and has a unified credit of $2,000, their total tax liability will be reduced to $8,000.

The unified credit is often used in estate planning to reduce the amount of taxes owed on gifts and inheritances. It is also used in conjunction with the applicable exclusion amount, which is the total amount of gifts and inheritances that can be given tax-free.

Overall, the unified credit is a valuable tool for reducing tax liability and maximizing the amount of wealth that can be transferred to future generations.