Definitions for "Exemption Equivalent"
A unified tax credit is deducted from any estate tax owed. This credit is the tax equivalent of the deduction from the gross estate of an amount called the exemption equivalent.
When property is given as a gift or passed to heirs as part of an estate, it is subject to federal estate and gift tax laws. Each person is given a tax credit that can be used to offset the tax assessed against a specific amount of property. The amount of property that results in a tax exactly equal to the credit is known as the "exemption equivalent". Technically, no property is exempt from federal estate and gift taxes, but the term exemption equivalent is commonly used. Stated another way, the credit is equal to the amount of tax due on a gift or estate transfer of property that has a value equal to the exemption equivalent amount.
The unified credit amount (currently $600,000) that is exempt from estate and gift taxes. Each individual is allowed this exemption.