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Inheritance tax was originally introduced to target the wealthiest 1%. But today, it has effectively become a middle-class tax. Why? Because the exemption limit has remained frozen for 28 years since 1997, while housing prices in the Seoul metropolitan area have soared. As a result, even ordinary families owning a single apartment can now face inheritance tax.

Against this backdrop, on September 11, 2025, President Lee announced a plan to raise the exemption to ₩1.8 billion. Stating that “it is cruel to force families to sell homes to pay taxes,” he framed the reform as a turning point in aligning the law with today’s realities.

Parents want to pass down their lifetime savings without heavy tax burdens, and children hope to receive these assets intact. In this post, we will review the reform’s key points, its expected impact, and the timing of potential application — all based on current law and facts.

Under the current law (as of September 2025), inheritance tax exemptions include ₩500 million basic deduction and ₩500 million spousal deduction, totaling ₩1 billion. These are stipulated under Articles 22 and 23 of the Inheritance and Gift Tax Act.

On September 11, 2025, President Lee proposed raising the limits to ₩800 million basic deduction and ₩1 billion spousal deduction, totaling up to ₩1.8 billion tax-free. This would be the first major adjustment in nearly 17 years.

If enacted, this reform would allow many families, especially in Seoul, to inherit a single home without being forced to sell it to pay taxes. However, it remains a legislative proposal until passed by the National Assembly.

Raising the exemption cap from ₩1 billion to ₩1.8 billion would significantly ease the tax burden, especially for middle-class families in the Seoul metropolitan area, where average apartment prices already exceed ₩1 billion.

According to National Tax Service data (2024), there are about 20,000 annual inheritance tax filers, with 70% concentrated in the capital region. 82% of inherited estates fall between ₩500M and ₩3B, and 56% of heirs are aged 80 or older.

With the proposed reform, the number of taxable cases is expected to decrease by around 8,000. This means many families will be able to keep their inherited homes without selling just to pay taxes.

The inheritance tax reform was already included in the government’s July 2025 tax plan. On September 11, 2025, President Lee reiterated his stance at a press conference, stressing that “forcing families to sell homes to pay tax is cruel.” If approved by the National Assembly, the reform could take effect as early as January 1, 2026.

However, not all families will be exempt from inheritance tax. Single heirs without a spouse, or those inheriting high-value properties, may still face taxation. In such cases, lifetime gifting can be a useful strategy to mitigate the tax burden.

For instance, as of August 2025, the average apartment price in Seoul exceeded ₩1.4 billion. This means that high-value properties and multiple-home owners could still fall under taxable estates despite the expanded exemption.

Even if the exemption limit is raised, the progressive tax brackets for inheritance remain unchanged. The rates are as follows:

• Up to ₩100M → 10%
• Up to ₩500M → 20% (–₩10M deduction)
• Up to ₩1B → 30% (–₩60M deduction)
• Up to ₩3B → 40% (–₩160M deduction)
• Over ₩3B → 50% (–₩460M deduction)

For example, if the taxable estate is ₩1.2B, the tax rate is 30%, resulting in ₩360M – ₩60M = ₩300M payable. Thus, while exemptions may reduce the number of taxable estates, high-value properties remain subject to significant taxation.

These rates are stipulated in the Inheritance and Gift Tax Act, Articles 55–56, and as of September 2025, no changes to the tax rate schedule have been officially announced.

In summary, the proposed reform would raise the inheritance tax exemption from ₩1 billion to ₩1.8 billion — the first major adjustment in nearly two decades. This would reduce the burden for many middle-class families, although high-value estates remain subject to progressive tax rates.

Parents want to pass on their lifetime assets without the heavy burden of inheritance tax. Children, in turn, hope to receive these assets without unnecessary tax burdens. This reform is an important step in reflecting such family expectations in the law.

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