Federal Estate Tax Computation and Applicable Credit Amount

Summary

This practice note discusses the federal estate tax computation and the applicable credit amount and reviews all applicable terms, with practical guidance on completing IRS Form 706. This form is used by executor clients to determine the estate tax. You calculate your federal estate tax by determining your asset value, the tax basis in the property, the value of the gross estate, and your gross estate deductions (marital and charitable, for example). Then determine your taxable estate and the credit to be applied to your taxable estate. Your applicable credit applies to both the gift tax and the estate tax, and it equals the tax on the applicable exclusion amount (the total amount exempted from gift or estate tax).