Korea's inheritance tax deduction is a choice between two totals: the basic deduction of 200 million won plus itemised personal deductions, or a flat lump-sum deduction of 500 million won — whichever is larger. For most households the flat 500 million wins and the matter ends there, but there is a clear band where it flips. With two minor children, the itemised combination reaches 560 million won and overtakes it.
The rules sit in Articles 18, 20 and 21 of the Inheritance Tax and Gift Tax Act: Article 18 sets the 200 million basic deduction, Article 20 the deductions for children, minors, the elderly and disabled heirs, and Article 21 the lump sum. The arithmetic is one subtraction, but which combination you pick moves the bill by tens of millions of won.
What the 500 million is being compared against
Article 21 allows a deduction of the greater of 500 million won or the sum of Article 18 and Article 20(1). So 500 million is not a fixed benefit — it is a floor. The itemised side, as set out by Korea's National Tax Service, breaks down like this.
| Deduction | Who qualifies | Amount |
|---|---|---|
| Basic deduction | Any estate opened by death of a resident or non-resident | 200 million won |
| Child deduction | Per child (an unborn child counts) | 50 million won |
| Minor deduction | Minors among heirs (excluding spouse) and cohabiting family | 10 million won × years until age 19 |
| Elderly deduction | Aged 65+ among heirs (excluding spouse) and cohabiting family | 50 million won |
| Disability deduction | Disabled heirs (spouse included) and cohabiting family | 10 million won × years of life expectancy |
Per NTS guidance, the child deduction stacks with the minor deduction, and the disability deduction stacks with the child, minor, elderly and spouse deductions alike. A single minor child therefore draws both the child and the minor deduction — and that stacking is what creates the crossover.
When the itemised total passes 500 million
Since the 200 million basic deduction is already included, the itemised personal deductions only need to exceed 300 million won to beat the lump sum. Calculated by household below; minor-deduction years count the remaining years to age 19 in Korean full-age terms.
| Household | Calculation | Personal deductions (100M won) | Basic 200M + personal (100M won) | Better choice |
|---|---|---|---|---|
| 2 adult children | 0.5 × 2 | 1.0 | 3.0 | Lump sum 500M |
| 2 adult children + one cohabiting parent aged 65+ | 0.5 × 2 + 0.5 | 1.5 | 3.5 | Lump sum 500M |
| 1 minor child (age 5) | 0.5 + 0.1 × 14 | 1.9 | 3.9 | Lump sum 500M |
| 6 adult children | 0.5 × 6 | 3.0 | 5.0 | Identical |
| 2 minor children (ages 5 and 7) | (0.5 + 1.4) + (0.5 + 1.2) | 3.6 | 5.6 | Itemised |
| 3 minor children (ages 3, 6, 10) | 0.5 × 3 + 0.1 × (16+13+9) | 5.3 | 7.3 | Itemised |
| 1 adult child with a disability (40 years' life expectancy) | 0.5 + 0.1 × 40 | 4.5 | 6.5 | Itemised |
Two crossover points show up. With adult children only, six barely ties and seven is where itemising wins — a household size that hardly appears in practice. A minor child, by contrast, can carry up to 240 million won on their own (at age 0: 50 million child plus 190 million minor), so two of them can flip it. A long life expectancy on the disability deduction clears 400 million by itself.
The 500 million lump sum is not the size of the benefit — it is the threshold below which you may skip the arithmetic. With young children or a disabled heir, that arithmetic cannot be skipped.
Add the spouse deduction and a 1 billion won line appears
The spouse deduction in Article 19 covers what the spouse actually inherits, up to the lesser of their statutory share limit or 3 billion won, and grants a minimum of 500 million won where the amount actually inherited falls short of that. A spouse who receives nothing still gets 500 million recognised. So in the common arrangement of a surviving spouse inheriting alongside children, 500 million lump sum plus 500 million spouse deduction sets a baseline of 1 billion won.
One exception is easy to miss. Where the spouse inherits alone, the lump-sum deduction cannot be applied — only the 200 million basic deduction plus itemised personal deductions. Arranging matters so that children renounce and only the spouse remains can therefore shrink the total deduction. That is why the deduction combination has to be calculated before renunciations or a division agreement are settled.
What the tax comes to by estate size
Rates run in five brackets, as compiled by Korea's Easy Law Service: 10% up to 100 million won; 20% up to 500 million (progressive credit 10 million); 30% up to 1 billion (60 million); 40% up to 3 billion (160 million); 50% above 3 billion (460 million). The figures below assume a surviving spouse and two adult children, counting only the 500 million lump sum and the 500 million spouse minimum (financial-asset and cohabiting-house deductions, debts and funeral costs excluded).
| Taxable estate (100M won) | Deductions (100M won) | Tax base (100M won) | Rate applied | Tax |
|---|---|---|---|---|
| 10 | 10 | 0 | - | 0 |
| 12 | 10 | 2 | 20% − 10M | 30 million won |
| 15 | 10 | 5 | 20% − 10M | 90 million won |
| 20 | 10 | 10 | 30% − 60M | 240 million won |
| 30 | 10 | 20 | 40% − 160M | 640 million won |
The zero at 1 billion won is the basis for the widely repeated line that Korean estates under 1 billion pay nothing. But that billion depends on a spouse who is alive and actually participating in the estate. In a second succession after the spouse has died, only the 500 million side survives and the tax base rises by 500 million. The 90 million won on the 1.5 billion row becomes a 1 billion base and 240 million won in tax — the same property, and sequence alone multiplies the bill 2.7 times.
The calculation bites hardest where the estate is essentially one apartment: the valuation follows market price while there is no cash to pay with. To weigh it against gifting portions in advance, read it alongside the piece on gift tax deduction limits and rate brackets.
What to check
- The filing deadline — within six months from the end of the month in which death occurred, at the tax office for the deceased's address. File nothing and the lump-sum deduction is capped at 500 million.
- Each minor child's age — the deduction is set by years remaining to 19, not by headcount. With two or more, run both routes.
- Disabled or elderly cohabiting family — cohabiting relatives qualify, so confirm residence and duration on the household registration record. The disability deduction stacks with the others.
- What the spouse actually inherits — the spouse deduction follows the real amount received, so the division agreement changes the deduction. Fix the calculation order before agreeing the split.
- Whether the spouse inherits alone — if all children renounce, the lump-sum deduction is excluded. Compare total deductions before filing renunciation papers.
- House valuation and acquisition tax — inheriting a home triggers acquisition tax separately from inheritance tax. The rate structure is in the piece on acquisition tax calculation order.
- Gifts made within ten years — property gifted within a set period before death is added back into the taxable estate. Gather the dates of past gifts first.