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Simple English definitions for legal terms
applicable exclusion credit
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A quick definition of applicable exclusion credit:
Applicable Exclusion Credit: This is a tax credit that is used for both estate and gift taxes. It is also known as the unified estate-and-gift-tax credit. The credit allows a certain amount of money to be excluded from the total value of an estate or gift, which reduces the amount of tax owed.
A more thorough explanation:
The applicable exclusion credit is a tax credit that is used to reduce the amount of estate and gift taxes owed by an individual. It is also known as the unified estate-and-gift-tax credit.
For example, if an individual's estate is worth $11.7 million, they can use the applicable exclusion credit to reduce the amount of estate tax owed. In 2021, the applicable exclusion credit is $11.7 million per individual.
The applicable exclusion credit is important for high net worth individuals who want to minimize the amount of taxes owed on their estate and gifts. By using the applicable exclusion credit, they can transfer more of their wealth to their heirs without incurring a large tax burden.