Credits Against Federal Estate Tax
Posted By admin on May 24, 2009
Credits against federal estate taxes are allowed for the following:
a. Credit for estate taxes paid to the state. There is a maximum limit for the amount of this credit.
b. Credit for federal gift tax paid on gifts regarded by Internal Revenue Service to be a part of the estate for estate tax purposes.
c. Credit for taxes paid on transfers of property received from previous estates.
d. Credit for foreign death taxes paid.
e. Federal Estate Tax and Gift Tax Credit.
• Federal Estate and Gift Tax Credit. The following credits are effective against estate taxes for decedents and for gifts made after 2006. The credit is applied against either the gift tax or estate tax, not as a deduction against the taxable value of the estate. Note that the credit was increased over time. In 2007, a decedent with an estate of less than $2,000,000 will not have to pay estate taxes.
• Credit for State Death Taxes. After December 31, 2004, the state death tax credit has been replaced by a deduction for state estate taxes.
• Installment Payment of Estate Taxes. If the closely-held business interest exceeds 35% (formerly 65%) of the adjusted gross estate, the taxes attributable to that interest may be deferred up to 14 years; annual interest payments may be paid for the first four years and the balance may be paid in up to 10 annual installments of principal and interest. The annual interest rate is 2% on the first $1,000,000 of taxable value. There will be a cost of living adjustment on the portion of estate’s taxable value that qualifies.
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