Zero Gift Tax on Giving 100 Million KRW to Children: Tax Saving Tips for Retiring Parents
As the retirement phase looms, the baby boomer generation is pondering over their children's marriage and inheritance concerns. When it comes to transferring assets, parents with substantial wealth should consider the deductions available for marriage or childbirth-related gift taxes.
Currently, the deduction for gift property to direct descendants is 50 million KRW for adult children (20 million KRW for minors). Additionally, a new provision has been introduced this year, allowing an extra deduction of 100 million KRW for marriage or childbirth. By combining the existing 50 million KRW deduction with the newly added 100 million KRW, it's possible to gift up to 150 million KRW without incurring gift tax. Let's explore some key points to consider:
Firstly, it's essential to identify the donor and recipient. The donor refers to the direct ascendants, typically the parents or grandparents of the newlywed couple. The recipient is the newlywed couple themselves. Therefore, if gifting to a newborn as the recipient, the childbirth gift deduction cannot be applied.
Secondly, timing is crucial. For marriage, the gift must be given within two years before or after the marriage registration date. Regardless of the wedding ceremony, if the marriage registration date falls within the two-year timeframe, the marriage gift deduction can be considered. Similarly, for childbirth, the gift must be given within two years from the child's birth date.
Lastly, consider the deduction limit (100 million KRW). The marriage gift deduction and childbirth gift deduction are combined for a unified 100 million KRW deduction. Some may mistakenly believe they can receive separate 100 million KRW deductions for marriage and childbirth, so it's essential to be mindful of the limit. For the baby boomer generation navigating retirement, carefully reviewing the newly introduced gift deduction provisions can lead to savvy tax planning.
For more details, please feel free to reach out at jz@taxjz.com or If you would like a consultation with an English-speaking Consultant/Accountant in Korea, please schedule a call at: Schedule a Call with Jz
