If you do not understand the difference between inheritance tax and gift tax
hello. Today, I’m going to learn about “inheritance tax and gift tax difference” with you. As always, I hope this information will be useful to you.
In fact, I think there are quite a few people who are confused about the difference between inheritance tax and gift tax. If you are trying to see the difference between inheritance tax and gift tax at a cursory glance, it seems that there are often cases of confusion due to a high degree of similarity in terms of the nature and type of the two types.
However, if you look carefully at the difference between inheritance tax and gift tax, you will be able to understand that the two types are distinctly different.
What is Inheritance Tax?
First of all, I think you need to know the meaning of inheritance tax, so I would like to organize the concept. Inheritance tax is a tax levied on property transferred free of charge to the direct ascendants and descendants of the deceased upon death.
2. What is gift tax?
Unlike inheritance tax, gift tax is a tax levied on property when it is transferred free of charge, reflecting the will of the person who intends to donate the property to their lineal ascendant, descendant, etc.
3. What do inheritance tax and gift tax have in common?
The reason why inheritance tax and gift tax are confused is because there are common elements. Inheritance tax and gift tax are both levied on property transferred free of charge.
Inheritance tax and gift tax are both levied when property is transferred free of charge, so many people seem to be confused about the difference between inheritance tax and gift tax. So, what are the distinct differences between inheritance tax and gift tax?
4. Inheritance tax and gift tax difference
Inheritance tax is levied at the time the property is transferred based on the death of the person who inherits the property, and gift tax is levied at the time the property is transferred by will based on the person who inherits the property while they are still alive. The biggest difference is in that respect.
The timing of inheritance tax and gift tax is strictly different, but the applicable tax rate is the same. However, when deducting taxes, the difference becomes significant.
For spouses, the amount of deduction is 600 million won, for lineal ascendants, 50 million won, for minors, 20 million won, for lineal descendants, 50 million won, and for other relatives, 10 million won.
In the case of gift tax, it is calculated from the last day of the month in which the gift was received, and must be reported and paid to the competent tax office within three months. If you report within the specified deadline, you can receive a 7% gift tax deduction.
Inheritance tax works the same way as gift tax. The person who inherits must pay tax, and the tax base and tax rate are applied the same as gift tax. However, it can be seen that inheritance tax is different from regulatory items in that the scale is larger than gift tax.
500 million won for lump-sum deduction, 200 million won for basic deduction, and 10 million won for minors 50 million won per person, spouse inheritance deduction is 500 million won for less than 500 million won, and 3 billion won at the maximum according to the calculation method of inherited property * legal inheritance share in case of more than 500 million won.
Inheritance deduction for financial assets is based on KRW 20 million, and if the value is less than KRW 20 million, the net financial property value is deducted, and if it exceeds KRW 20 million, 20% or KRW 20 million, whichever is greater The maximum exemption limit will be 200 million. Inheritance of a cohabitation house is exempted by 80% of the housing value, and a maximum of 500 million won is deducted.
The large difference in the size of the deduction is that inheritance tax and gift tax transfer and apply property free of charge, but the amount of deduction differs greatly in that one property is transferred posthumously and the other property is transferred during one’s lifetime.
If the property to be inherited is less than 1 billion won, it is advantageous to pay inheritance tax, and if it is more than 1 billion won, it is advantageous to pay gift tax. Still, I recommend that you do the calculations carefully and follow the procedure.
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