Estate and Gift Tax
The federal estate and gift tax is a unified transfer tax system that taxes the transfer of wealth during life (gifts) and at death (estate), with a combined lifetime exemption.
Explanation
The annual gift tax exclusion allows tax-free gifts up to $18,000 per recipient (2024, indexed for inflation). Gifts exceeding the annual exclusion reduce the lifetime unified credit. The estate tax applies to the gross estate (FMV of all assets at death) minus deductions (debts, expenses, charitable bequests, unlimited marital deduction). The unified credit shelters a significant amount from tax (currently $13.61 million per person, scheduled to decrease). Gift splitting allows married couples to treat gifts as made equally by both spouses.
Key Points
- •Annual gift exclusion: $18,000 per donee (2024); unlimited marital and charitable deductions
- •Unified credit covers both gift and estate tax with a combined lifetime exemption
- •Gross estate includes all assets owned at death, life insurance proceeds, and certain transfers
Exam Tip
The unlimited marital deduction eliminates estate tax between spouses — but only for transfers to a U.S. citizen spouse.
Frequently Asked Questions
Related Topics
Individual Taxation
Individual taxation covers the rules for computing taxable income, deductions, credits, and tax liability for individual taxpayers under the Internal Revenue Code.
Basis Calculations
Basis is the amount of a taxpayer's investment in an asset for tax purposes, used to determine gain or loss on disposition and depreciation deductions.
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