A Korean with assets in both the U.S. and South Korea may be subject to taxes in both countries upon inheritance or gift, and without advance planning, could end up paying double taxes. You can minimize double taxation by taking advantage of the U.S.-Korea tax treaty and each country's tax credit system.
U.S. Estate Tax - Basic Gift Tax Structure
- Consolidated exemption limits: $15M per person (2026, made permanent by the One Big Beautiful Bill Act)
- Tax rates Up to 40% for excess over the exemption limit
- Spousal deduction Unlimited exemption for citizen spouses (but not non-citizen spouses)
- Annual gift tax exemption: $19,000 per donee (2026)
- Tax brackets: Citizens-Permanent Residents are taxed on assets worldwide
Korean Inheritance Tax - Basic Structure of Gift Tax
- Inheritance tax: 10-50% (top tax bracket 50%) depending on tax bracket
- Gift tax: 10-50% Progressive tax rate
- Spousal deduction Minimum: 500 million won ~ Maximum: 30 million won
- Tax brackets: Korean residents are taxed on assets worldwide, non-residents on assets in Korea only
When double taxation occurs
- A U.S. citizen/permanent resident inherits Korean property
- A Korean parent gifting Korean assets to a U.S.-resident child
- A U.S. resident dies and has assets in both Korea and the U.S.
Double taxation avoidance strategies
1. Foreign Tax Credit
You can deduct inheritance and gift taxes paid in Korea against your U.S. taxes. Conversely, taxes paid in the U.S. can also be deducted in Korea.
2. Qualified Domestic Trust (QDOT)
You can't take the unlimited marital deduction when you inherit from a noncitizen spouse, but you can set up a QDOT to defer estate taxes for your spouse's lifetime.
3. Gifting strategies
This is a way to reduce the size of your inheritance by systematic gifting utilizing the annual tax-free limit ($19,000/person). However, you should also check your Korean gift tax reporting obligations.
4. Structuring assets
Design structures to legally reduce your estate tax burden by utilizing living trusts, LLCs, family limited partnerships, and more.
Frequently asked questions
Q. If my parents send me money from Korea, do I have to pay taxes in the U.S.?
Under U.S. tax law, gifts from foreigners are not subject to income tax on the donor. However, foreign gifts in excess of $100,000 per year must be reported to the IRS on Form 3520. Gift tax may be due on the Korean side.
Q. Could the exemption limit be reduced in the future?
The passage of the One Big Beautiful Bill Act of 2025 made the existing TCJA's high exemption threshold ($15M) permanent, so you no longer have to worry about reductions due to sunset. However, it is recommended that you consult with an expert on a regular basis, as it is subject to change based on future tax law changes.
U.S.-U.K. double taxation, advance planning can save you money. For an estate and gift tax consultation, contact the Law Offices of Jin D. Cho.
Phone: (718) 353-2699 | Email: jd@choattorneys.com