Last year a record 22,524 estates were assessed inheritance tax in Korea. Of these, 76.8%, or 17,294, had a taxable base of KRW 1 billion or less. The taxable base is the amount left after deductions, to which the tax rate is applied. The number in this bracket has grown about ninefold from 1,971 in 2007.
Inheritance tax was designed as a tax on the wealthy. But the lines below which no tax is owed, a lump-sum deduction of KRW 500 million and a minimum spousal deduction of KRW 500 million, have not changed since the end of 1996. Even without raising tax rates, more people can become taxable as asset values rise. The question is whether this year's regular session of the National Assembly will move that line.
- The line stayed put while taxpayers multiplied
Today, heirs deduct whichever is larger: the basic deduction plus personal deductions, or the KRW 500 million lump-sum deduction. If there is a surviving spouse, a spousal deduction of at least KRW 500 million is added. That is where the rule of thumb comes from that a spouse and children inheriting together owe no tax on roughly the first KRW 1 billion.
While that KRW 1 billion line stood still, 16% of people who died in Seoul last year left estates that received an inheritance tax bill. Of all inheritance tax cases, 65.3%, or two in three, were Seoul (8,383) or Gyeonggi (6,322) residents. That is seven times more than 20 years ago in Seoul and 11 times more in Gyeonggi.
- Prices have doubled
If 2020 prices are set at 100, 1997 was 56.9 and 2024 was 114.2. Prices rose more than 100% in nearly 30 years. KRW 500 million in 1997 was worth about KRW 1 billion in 2024 money.
Home prices jumped too. One newspaper editorial noted that most 30-pyeong (about 100 square meter) apartments in Seoul cost under KRW 200 million in the late 1990s, while the average Seoul apartment now sells for KRW 1.6 billion. Its point: even with a spouse and children inheriting together, a single Seoul apartment can push some families over the deduction line.
- Yet most of the tax comes from large estates
Estates with a taxable base of KRW 1 billion or less paid KRW 875.6 billion in inheritance tax, 9.8% of the total. They are three in four taxpayers but less than a tenth of the money.
Raising deductions could take part of this group out of the tax, but revenue would fall. Last year the National Assembly Budget Office estimated that raising the lump-sum deduction from KRW 500 million to KRW 800 million would reduce revenue by about KRW 3.0843 trillion over five years.
- Why last year's attempt failed
Two approaches collided in last year's regular session. In May last year the government proposed switching to an 'inheritance acquisition tax,' which taxes each heir on the share they receive. President Lee Jae-myung, since his campaign, has argued for keeping the current system but raising the lump-sum deduction to KRW 800 million and the spousal deduction to KRW 1 billion, so a spouse would pay no tax on up to KRW 1.8 billion.
In the end the two approaches found no common ground, and inheritance tax relief did not become law last year. Lawmakers said they would continue talks in the first half of this year, but in late August an editorial noted that the revision had kept being pushed back because it never made the policy priority list.
Last year's debate also produced many different fixes. Even within the ruling party there was disagreement over KRW 700 million versus KRW 800 million for the lump-sum deduction, while the opposition proposed a KRW 1 billion deduction and cutting the top rate from 50% to 30%.
- This year's plan revised the family-business deduction
The 2026 tax reform plan announced by the Ministry of Finance and Economy on Aug. 3 included an overhaul of the family-business inheritance deduction, which sharply cuts inheritance tax when heirs take over a long-running company. The proposal tightens the minimum management period from 10 years to 30 years while widening the deduction limit to 'years of management × KRW 2 billion,' up to KRW 100 billion.
Calls to revisit the middle-class deduction are getting louder. On Aug. 25, National Tax Service Commissioner Lim Kwang-hyun told the National Assembly that the spousal deduction had stayed at KRW 500 million for 27-28 years and needed urgent fixing. On Sept. 28, Democratic Party lawmaker Lee Kwang-jae said he would push to index taxes to inflation automatically. This year's regular session is scheduled to run for 100 days from Sept. 1.
- Will fewer homes come up for sale if the deduction rises?
When inheritance tax changes, homeowners' choices change too. Take one KRW 1.6 billion apartment, the Seoul average, left to a spouse and children, and the gap is stark. This BITPRESS calculation uses the minimum KRW 500 million spousal deduction and the 3% filing credit, and leaves out acquisition tax.
| Choice | Current rules (KRW 1 billion deduction) | Higher deduction (KRW 1.8 billion) |
|---|---|---|
| Gift to one child while alive | About KRW 446.2 million | About KRW 446.2 million |
| Hold until death and pass on | About KRW 116.4 million | KRW 0 |
At a KRW 1.8 billion deduction, the inheritance tax on this home disappears. And because an inherited home's purchase price is set at its value at inheritance, the gain up to that point also escapes capital gains tax on a later sale. For a home worth around KRW 1.6 billion, holding it to the end becomes better than selling or gifting early.
Two flows of listings could shrink: inherited homes sold to pay the tax, and early gifts. Gift filings for Seoul multi-unit buildings already fell from 2,164 in April, ahead of the May return of heavier capital gains tax on multi-home owners, to 766 in August. One tax expert expects the rest to time their gifts around whether the tax reform passes.
The scale is limited, though. Last year 8,383 Seoul estates owed inheritance tax. Even if every one sold a home, that would be about 12% of the 70,799 Seoul apartment listings on Sept. 9. What is moving Seoul listings and deals now is the heavier capital gains tax that returned in May, not inheritance tax.
- BITPRESS Insight
Reforming the deduction is a tax question, but it also changes how Seoul homes reach the market. At KRW 1.8 billion, the cheapest option for an older owner of a home worth around KRW 1.6 billion is to neither sell nor gift early, but to hold it to the end.
Three changes follow: fewer early gifts, fewer homes sold after inheritance to pay tax, and mid-priced Seoul apartments reaching the market more slowly. Homes worth several billion won, which still owe heavy tax even after the change, are less affected.
Listings will not freeze overnight. Inheritance happens only when an owner dies, and Seoul's taxed estates each year equal about 12% of listings. The change builds up slowly over several years.
The rule of thumb: when passing a home on costs less tax than selling it, homes go to family instead of the market.
Sources
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Glossary
LumpSumDeduction — The amount subtracted all at once from an estate before tax is calculated; currently KRW 500 million.
Spousal deduction — An extra amount subtracted when a spouse inherits; at least KRW 500 million.
Taxable base — The amount left after deductions, to which the tax rate is actually applied.
InheritanceAcquisitionTax — A system that taxes each heir separately on the share they receive, instead of taxing the whole estate of the deceased.
FamilyBusinessDeduction — A program that sharply cuts inheritance tax when heirs take over a long-running company; this year's plan would raise the limit to up to KRW 100 billion.
BITPRESS articles are information to help your investment decisions, not a recommendation to buy or sell any stock or coin. Investment decisions and their results are your own responsibility.
