GLOSSARY · TAX & ESTATE
Estate tax exemption
The amount each person can transfer during life and at death, combined, before federal gift or estate tax applies. Transfers above it are taxed at 40%. It is set by law for each year and adjusted for inflation, and many states have their own estate tax with a far lower exemption.
Also called: basic exclusion amount, lifetime gift and estate tax exemption, unified credit
FORMULA
Federal estate tax = 40% × (taxable estate + taxable lifetime gifts − exemption), when positive
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CHAPTER · LEGACY & PHILANTHROPY PLANNING · STRATEGIESGifts, Estate Tax and Passing Wealth Across GenerationsCHAPTER · THE LONG GAME: GREEN CARD, RETIREMENT OR LEAVING · DEEP DIVEEstate Rules for People Who Are Not CitizensRELATED TERMS
SOURCES
- What's new: Estate and gift tax. Internal Revenue Service.