Korean Burdened Gift Calculator

Handing a home to a child or spouse together with the mortgage or the tenant's deposit attached to it is called a burdened gift, 부담부증여. Two taxes arise, not one. The value left after the debt is a gift, so the recipient pays gift tax; the debt portion is treated as if the property had been sold for that amount, so the giver pays capital gains tax. This calculator works out both, then compares the total with the gift tax that would have been due on an outright gift with no debt attached, to show whether the burdened gift is actually worthwhile.

You enter the appraised value, the debt being transferred, what the giver originally paid, the relationship, the holding period and any gift received from the same person in the past ten years. The result shows gift tax, capital gains tax, the sum of the two and the difference against an outright gift.

Parents planning to pass a home to a child use it before the gift contract is signed. Gift tax is progressive, so attaching debt lowers the gift value, drops it into a lower bracket and cuts the gift tax sharply. Capital gains tax appears in its place, so the question is whether the two together come to less than an outright gift. If the home has not risen much since purchase the capital gain is small and the structure usually wins; if it has risen a lot, the capital gains tax can wipe out the saving.

It is also a way to sketch the picture before meeting a tax adviser. Because two different people pay the two taxes, the family needs to settle in advance who bears what, and the gift tax return is due within three months of the end of the month in which the gift is received.

상속세 및 증여세법 제47조제1항 deducts the debt assumed by the recipient from the value of the gift, and 소득세법 제88조 treats that assumed debt as a sale for value. Under 소득세법 시행령 제159조 the sale price and the acquisition cost of the deemed sale are both apportioned by the share the debt bears to the whole value: if the debt is 40% of the value, 40% of the sale price and 40% of the original cost are carved out.

For the gift tax, the gift portion after removing the debt gets the relationship-based allowance, applied on a ten-year cumulative basis: ₩600 million for a spouse, ₩50 million for a gift from a parent to an adult child. The remaining base is taxed on a five-step progressive scale from 10% up to ₩100 million to 50% at the top, and filing on time earns a 3% credit against the computed tax.

For the capital gains tax, the apportioned cost is deducted from the apportioned sale price to get the gain, and a long-term holding deduction is taken. Only the general table is used here: 6% at three years, 20% at ten and 30% from fifteen. The annual basic deduction of ₩2.5 million comes off, the ordinary income tax scale is applied and 10% local income tax is added. The single-home exemption and its special deduction table are left out, because they would have to be tested separately on the deemed-sale portion alone.

Take the default on screen. A home appraised at ₩1 billion carries ₩400 million of debt; the parents bought it for ₩500 million, held it for ten years and pass it to an adult child. The gift portion is ₩1 billion less ₩400 million, or ₩600 million, and after the ₩50 million allowance the base is ₩550 million. That sits in the 30% bracket, giving ₩105 million, and the 3% filing credit brings the gift tax to ₩101.85 million.

The deemed sale uses the 40% debt share: a sale price of ₩400 million, a cost of ₩200 million and a gain of ₩200 million. Ten years of holding takes 20% off, leaving ₩160 million; the ₩2.5 million basic deduction leaves a base of ₩157.5 million, the 38% rate less the progressive deduction gives ₩39.91 million, and local income tax lifts it to ₩43,901,000. The two taxes total ₩145,751,000. An outright gift of ₩1 billion would have cost ₩218.25 million in gift tax, so the burdened gift saves ₩72,499,000. Had the home been bought for ₩900 million the gain would shrink to ₩40 million, the capital gains tax to a little under ₩3.5 million, and the saving would exceed ₩110 million.

The biggest mistake is forgetting the capital gains tax. People sign because the gift tax falls, then the parents receive a capital gains assessment the following May. The second is the reality of the debt. Between spouses or between parents and children the assumption of debt is not presumed, so the child must be able to show from bank records that they are actually paying the interest and principal. If the parents keep paying after the gift, the whole debt is recharacterised as a gift and penalty tax follows.

Entering a guessed purchase price is risky too. A home bought long ago has a low cost, which inflates the gain and can make the burdened gift worse than an outright one. Owners of several homes in an adjustment target area face heavier capital gains rates that push the figure well above what this calculator shows. Finally, this covers national taxes only. The recipient owes acquisition tax separately on the gift portion and on the deemed-purchase portion, and that calculation is a different one.