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Simple English definitions for legal terms
unified estate-and-gift tax credit
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A quick definition of unified estate-and-gift tax credit:
A unified estate-and-gift tax credit is a type of tax credit that is subtracted directly from a person's total tax liability, dollar for dollar. This means that it reduces the amount of tax a person has to pay. It is applied against the federal unified transfer tax and is often called the unified credit or applicable exclusion credit. It is important to note that this type of tax credit is different from a deduction, which only reduces a person's taxable income.A more thorough explanation:
The unified estate-and-gift tax credit is a type of tax credit that is applied against the federal unified transfer tax. This credit is subtracted directly from one's total tax liability, dollar for dollar, as opposed to a deduction from gross income.
For example, if someone owes $10,000 in federal estate and gift taxes, and they have a unified estate-and-gift tax credit of $5,000, they will only have to pay $5,000 in taxes.
Another example of a tax credit is the child- and dependent-care tax credit, which is available to a person who is employed full-time and who maintains a household for a dependent child or a disabled spouse or dependent. This credit can help offset the cost of childcare expenses.
The earned-income credit is another type of tax credit that is available to low-income workers with dependent children. This credit is refundable, which means that if the credit exceeds the total tax liability, the taxpayer will receive a refund for the difference.
Overall, tax credits can help reduce the amount of taxes that someone owes, and can provide financial relief for certain expenses or situations.