Income Sourcing & Allocation

For cross‑border taxpayers, the most important question is often not how much tax you owe — but where you owe it.

The U.S. and Korea use different rules to determine whether income is U.S.-source, Korea‑source, or both. These rules affect:

• Which country has primary taxing rights
• Whether foreign tax credits apply
• How much tax you ultimately pay
• Whether double taxation occurs
• How income must be reported

Income Sourcing & Allocation helps you classify each type of income correctly under U.S. law, Korean law, and the U.S.–Korea tax treaty.

This ensures accurate reporting, proper crediting, and minimized global tax liability.

Clients often ask:

• “Is my salary U.S.-source or Korea‑source if I work in both countries”
• “How do I allocate stock compensation when part of the vesting happened in Korea”
• “Are Korean rental properties taxed in the U.S.”
• “How do I report Korean interest or dividends on my U.S. return”
• “Does Korea tax my U.S. business income”
• “How do I avoid double taxation when income is earned across borders”
• “What happens if I move mid‑year”

These questions are critical — and the answers depend on precise sourcing rules.

We analyze each income stream and determine how it should be sourced, allocated, and reported across both countries.

✔ Salary & Employment Income

• U.S. workdays vs Korea workdays
• Remote work and hybrid arrangements
• Stock options, RSUs, bonuses, and severance
• Treaty allocation for cross‑border employment

✔ Business & Self‑Employment Income

• Permanent establishment considerations
• U.S.-source vs Korea‑source business profits
• Service income performed across borders
• Allocation for freelancers and consultants

✔ Investment Income

• Interest, dividends, and capital gains
• Korean financial accounts and securities
• U.S. brokerage accounts held by Korean residents
• Treaty‑based reduced withholding rates

✔ Rental & Real Estate Income

• Korean property owned by U.S. residents
• U.S. property owned by Korean residents
• Depreciation, expenses, and sourcing rules
• Foreign tax credit coordination

✔ Pensions, Severance, and Retirement Income

• Korean 국민연금 (NPS)
• Severance (퇴직금)
• U.S. Social Security
• Treaty allocation and exemption rules

✔ Mid‑Year Moves & Life Transitions

• Residency changes
• Dual‑status years
• Income earned before/after relocation
• Split‑year allocation

Income sourcing is the backbone of cross‑border tax planning.

We approach it with precision and clarity.

• Treaty‑aligned sourcing: We apply the U.S.–Korea tax treaty correctly
• Holistic coordination: Sourcing, residency, and foreign tax credits work together
• Detailed allocation: Workdays, vesting periods, and income timing are analyzed carefully
• Clear explanations: You understand why income is sourced a certain way
• Forward‑looking planning: We help you structure future income more efficiently