Last month, 28-year-old office worker Kim struggled for a long time to secure funds for a rental home. Taking out a loan posed limits and interest burdens. He discovered that utilizing the 'gift' option could allow him to receive substantial support from his parents without incurring any gift tax through the marriage gift tax exemption. With a total of 320 million won received from both sets of parents, Kim and his spouse were able to alleviate their concerns about rental costs.
Recently, more newlyweds are using the marriage gift tax exemption as a means to secure housing funds. This exemption, which took effect on January 1, 2024, allows individuals to receive up to 150 million won tax-free from direct ancestors, such as parents or grandparents, in addition to the existing 50 million won exemption for adult children over a ten-year period. By applying the exemption for both the bride and groom, along with the additional relative exemption of 10 million won each, couples can receive a maximum of 320 million won without tax liability. This exemption applies to gifts received within two years before and after the marriage registration date. For instance, if a couple registers their marriage on July 10 this year, gifts received from July 10, 2024, to July 10, 2028, will qualify. This applies equally to first marriages and remarriages.
Lee Jeom-ok, head of the tax team at Shinhan Financial Group, stated, "The marriage exemption can be utilized up to a lifetime limit of 100 million won, making it a popular choice for newlyweds looking to cover housing costs such as home purchases or rental deposits. Recently, consultations have increasingly focused on maximizing tax benefits by combining the marriage exemption with other gifts rather than solely relying on it." She added, "The marriage exemption applies not only to gifts from parents but also from grandparents and other direct ancestors. There have been numerous cases where grandparents' gifts are considered in light of inheritance tax planning."
How significant is the tax-saving effect of the marriage gift tax exemption? Assuming a child with no prior gift history receives 150 million won from their parents, applying the marriage exemption would mean that both the basic exemption of 50 million won and the marriage exemption of 100 million won are applied, resulting in a taxable amount of zero. Consequently, no gift tax would be incurred. In contrast, without the marriage exemption, only the basic exemption of 50 million won would be recognized, leading to a taxable amount of 100 million won. In this case, the calculated tax would be 10 million won, and even after applying the tax credit for timely reporting, the couple would still face a gift tax burden of approximately 9.7 million won.
Experts advise that understanding existing gift history is as crucial as the marriage exemption itself. While the marriage exemption is an additional benefit, gifts received from the same individual within the last ten years are subject to cumulative taxation. If the basic exemption of 50 million won has already been utilized, the taxable amount could be larger than expected, making prior verification necessary. Even if no gift tax is incurred, it is advisable to file a report, as the gift tax return and gift contract can serve as important documentation during future funding plan submissions or source of funds verification processes. Lee emphasized, "To qualify for the marriage exemption, gifts should be received after confirming the marriage intent through invitations, and the marriage registration should occur within two years thereafter. Note that the marriage exemption and childbirth gift exemption cannot be applied simultaneously; one must be chosen."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.