862 / What is the Section 2010 "unified credit" that is allowed against the federal estate tax?

The unified credit is a dollar amount allocated to each taxpayer that can be applied against the gift tax and the estate tax. The estate tax unified credit is equal to $5,541,800 in 2025 (projected), which translates into a tentative tax base (or unified credit exemption equivalent or applicable exclusion amount) of $5,541,800 in 2025 (projected) ($13.99 million). In 2018, the credit was $4,419,800 ($11.18 million), $4,505,800 in 2019 ($11.4 million), $4,577,800 in 2020 ($11.58 million), $4,625,800 in 2021 ($11.7 million), and $4,769,800 in 2022 ($12.06 million), $5,113,800 in 2023 ($12.92 million) and $5,389,800 in 2024 ($13.61 million).¹ See Appendix D for amounts in other years (and gift tax amounts).

Under EGTRRA 2001, no estate tax is imposed on an estate if the decedent died in 2010, but the beneficiaries are subject to a modified carryover basis. Therefore, 2010 TRA permitted estates to elect to be subject to the modified carryover basis rules and no estate tax or subject to an estate tax, with a step-up in basis, and a $5 million applicable exclusion amount.

The credit is reduced directly by 20 percent of the amount of lifetime gift tax exemption the decedent elected to use on any gifts made after September 8, 1976 (this $30,000 exemption was repealed by the Tax Reform Act of 1976 as to gifts made after 1976). The 20 percent reduction is made even though the value of the property to which the exemption applied is brought back into the estate for estate tax purposes. The reduction is not a deprivation of property under the due process clause of the U. S. Constitution.²

The credit is also reduced (but indirectly) by the amount of unified credit applied against any gift tax imposed on the decedent’s post-1976 gifts. The indirect reduction is accomplished by adding to the taxable estate the amount of all taxable gifts made by the decedent after 1976, other than gifts includable in the gross estate, and then applying the estate tax rates to the sum (see Q 821).