Know the difference between inheritance tax and gift tax
Today, let’s take a look at inheritance tax and gift tax. Even the basic concepts are often confusing, so let’s look at them first. First of all, it has something in common in that it is a tax that occurs on property that is received free of charge without any consideration. It is true that a separate property came in for free, so you have to pay taxes. However, if the person giving the property is alive, the former is taxable if the latter is deceased.
Let’s look at the difference between inheritance tax and gift tax. Basically, the difference that distinguishes the two is who is centered in the tax calculation. In the case of the former, all property is calculated by summing up the person who died. On the other hand, in the case of the latter, each recipient has a separate tax obligation by calculating each tax.
Let’s find out more clearly about the difference between inheritance tax and gift tax. First of all, the former does not matter how many people share it. It’s just adding up all the assets the deceased person had and applying the progressive tax rate.
On the other hand, in the case of the latter, the amount is divided among many and the progressive tax rate per person is lowered, so the amount of tax to be paid in total is reduced compared to actually giving it to one person. In addition, the items that can be deducted are also different. The former deduction is divided into lump sum, spouse, financial property, cohabitation, etc.
The latter deduction, on the other hand, differs according to the relationship between the giver and the recipient. In the case of a spouse, 600 million won, in the case of an adult child, 50 million won, in the case of a minor child, 20 million won.
In addition, to find the taxable amount of the latter, you can add the property received from the same person within 10 years. After all, it is a relatively simple calculation. However, in the former case, the process of calculating the tax amount is quite complicated. Although the tax rate is the same, you can think that a 10% to 50% tax rate is applied to the tax base after subtracting the deduction, depending on the tax base range. After all, the key to tax savings is to apply for a low tax rate.
If the property to be inherited is 10 billion won, the child will pay 10 million won in gift tax. If you pay inheritance tax, depending on what happens to your inheritance, the tax may be 10 million won, but it may be up to 5 billion won.
To be more accurate, check your actual property carefully and calculate which one will be advantageous between inheritance tax and gift tax. Above, we learned about the difference between inheritance tax and gift tax.
[Source] If you do not understand the difference between inheritance tax and gift tax | Author PanterA
It is important to be clearly aware of the difference between inheritance tax and gift tax, but in the end, it is more important to consider how to save tax within legal boundaries related to real estate. From that point of view, it is often given in 10-year increments in advance for tax savings. Of course, since the options available are limited depending on the circumstances of each family, it is recommended to consider various factors before making a decision.