Unified tax credits are a form of federal tax credit that may be used to offset the amount of estate or gift tax incurred within a given tax period. Sometimes referred to as the Generation Skipping Transfer tax, the unified tax credit helps to reduce the tax liability that normally comes along with inheritances or gifts of financial instruments that are received. The tax credit can help to relieve some of the tax burden that would otherwise possible mean the necessity of selling the gift or inheritance in order to settle the taxes owed.

Currently, the unified tax credit allows taxpayers to total the amount of any estate or gift taxes that are owed during the tax year and apply for a credit for at least a portion of the total taxes due. The unified tax credit can sometimes account for as much as one third of the taxes assessed, which can be a substantial tax break when the gifts or inheritance involves property or valuable stocks and other investments. As with all types of tax credits, it is necessary to document the value of the assets, properly assess the amount of tax due, and then calculate the allowed portion of unified tax credit that may be applied.

The ability to apply a unified tax credit is not a tax break that citizens of the United States will enjoy for many more years. At present, the plan is to discontinue the unified tax credit after the 2010 tax year. However, the good news is that the amount of allowed credit for tax years 2008 through 2010 are expected to be adjusted to higher levels than at any time in the past.

At the present time, a unified tax credit is applied on a dollar per dollar basis. There are restrictions on the type of gifts and estate inheritances that are eligible for a unified tax credit. While the laws regarding the credit are refined from time to time, lifetime gifts and inheritances such as property have always been covered under the provisions of the unified tax credit. However, taxpayers are urged to seek the counsel of an accountant that is well-versed in tax law. A professional of this type will be aware of any and all changes to existing laws that could impact the eligibility of any given asset.