Gift vs Inheritance Tax Comparison

This calculator lines up two routes for passing on a parent's assets: give part of it now as a gift and inherit the rest later, or give nothing now and inherit everything. The gift route adds gift tax today to inheritance tax later; the inherit-only route has inheritance tax alone. For real estate, acquisition tax is added to both. The output is "on these conditions, this route is cheaper by this much", never a blanket claim that gifting wins.

The biggest variable is how many years pass between the gift and the start of the inheritance. Nobody knows that number, so it is an input. This makes the page less a tool for getting an answer than a tool for seeing, in won, how soon an inheritance would have to start for the gift to have been pointless.

Parents wondering whether to transfer assets to their children early, and children who have been asked "do you want it now or later". It is for checking the real numbers on your own family's estate before acting on the common advice that gifting early saves tax.

It matters most when a parent is elderly or in poor health and the inheritance may not be far off. If it starts within the add-back period, the gift saves nothing and costs part of the inheritance deduction on top. If the parent is young and the assets are likely to appreciate, the gift has a genuine advantage. Which case you are in only shows once the conditions are entered.

The key provisions are 상속세 및 증여세법 제13조 and 제24조. Under 제13조, gifts made to an heir within 10 years before the inheritance begins (5 years for non-heirs such as grandchildren) are added back into the estate to form the taxable value; under 제24조, the inheritance deductions are capped by that add-back amount. To prevent double taxation, 제28조 credits the gift tax calculated at the time against the inheritance tax. Where the taxable value is ₩500 million or less, neither the deduction cap nor the gift tax credit applies.

The calculation follows that sequence. For the inherit-only route, debts come off the whole estate, then the lump-sum, spouse, financial-asset and cohabiting-home deductions, then the rates, then a 3% credit for filing on time. For the gift route, the gift allowance (₩50,000,000 for an adult child) comes off the gift to find the gift tax; inheritance tax is then worked out on the remainder, and if the gift falls inside the add-back window it is added back at its value on the gift date, the deductions are capped, and the gift tax credit is subtracted. A gift to a non-heir grandchild carries a 30% surcharge. For real estate, inheritance acquisition tax at 2.8% (0.8% for a single-home household) and gift acquisition tax at 3.5% (12% under the regulated-zone heavy rate) are added to their respective routes.

Take a parent with ₩2 billion, a surviving spouse and two children, who gives one adult child ₩500 million now, with the inheritance starting five years later and asset growth set to zero. Inheriting everything: after the lump-sum and spouse deductions the taxable base is ₩1 billion, the tax before credits is ₩240 million, and the ₩7.2 million filing credit brings it to ₩232.8 million.

On the gift route, ₩500 million less the ₩50,000,000 allowance gives ₩450 million, and the gift tax is ₩77.6 million. Five years later the remaining ₩1.5 billion has the ₩500 million gift added back, the taxable value is ₩2 billion again, the base is ₩1 billion, and from ₩240 million the ₩80 million gift tax credit and then the filing credit come off, leaving ₩155.2 million. Add the gift tax and the total is ₩232.8 million, identical to the inherit-only route to the won. Move the inheritance to eleven years later and the ₩500 million is no longer added back: inheritance tax falls to ₩87.3 million, the total to ₩164.9 million, and the gift route is ₩67.9 million cheaper.

The most common is looking only at the gift tax and forgetting the add-back. If the inheritance starts within 10 years, the gift goes back into the estate and, as the example shows, the saving is nil. The second is missing that "within 10 years" includes the 10th year exactly. On the anniversary itself the gift is still counted; it takes one more day to clear. That is why the calculator flags the boundary year separately.

The third is leaving growth at zero and concluding there is no difference. The added-back gift is frozen at its value on the gift date, so any rise after that stays out of the inheritance tax. For appreciating assets that is the real advantage of gifting, and it only appears on screen once a growth rate is entered. The fourth is entering the same acquisition tax base for both routes: inheritance uses the assessed value and gifts use the recognised market value, and that gap matters more than the difference in rates. Finally, the result holds only for the assumptions you entered. Since nobody knows when an inheritance will begin, do not decide on this page alone; talk to a tax adviser.