What Happens to Your Taxes When You Move from Korea to the U.S.?
한국에서 미국으로 이사할 때 세금은 어떻게 바뀌는가

Overview — What Changes and When 세금 변화의 시점과 내용

Moving from Korea to the United States triggers the most complex tax year most individuals will ever experience. In a single calendar year, you transition from Korean tax resident (worldwide income to Korea) to U.S. tax resident (worldwide income to the U.S.), with a period in between where different rules apply to the income from each period.

Residency Start Date — The Most Misunderstood Rule 거주자 시작일 — 가장 많이 오해되는 규정

Residency Start Date Rules by Test — IRS Publication 519

Dual-Status Year — How It Works 이중신분 과세연도

Most people who move from Korea to the U.S. mid-year experience a dual-status tax year — part of the year as a non-resident alien and part as a resident alien. The split occurs at the residency start date.

Dual-Status Filing Restrictions

• No standard deduction: Dual-status taxpayers cannot claim the standard deduction for any portion of the year. Only itemized deductions (Schedule A) are available, and only for the resident portion of the year. This is one of the most significant disadvantages of dual-status vs. full-year resident filing.
• No Married Filing Jointly (generally): A dual-status taxpayer cannot file a joint return with their spouse. The only exception: if both spouses elect under §6013(h) to be treated as U.S. residents for the entire year — which means the non-resident spouse must report worldwide income (including Korean income) from January 1, including any Korean income from before the move. Model both scenarios carefully.
• Credits must be prorated: Certain credits (Child Tax Credit, education credits) are available only for the resident portion of the year. Some credits are denied entirely for dual-status years.
• Two-part return: The dual-status return consists of Form 1040 (covering the resident period) with a statement or Form 1040-NR covering the non-resident period attached. This is administratively complex — professional preparation is strongly recommended.

Pre-Move vs. Post-Move Income Split 이사 전후 소득 분리

The exact residency start date determines the split. Income earned on or after the start date is subject to U.S. tax as worldwide income. Income earned before the start date is not — even if it was paid after the start date, it may qualify as Korean-source income earned before residency began.

Korean Income Types — U.S. Treatment 한국 소득 유형별 미국 세법 처리

FBAR & FATCA — When They Begin 해외 금융계좌 신고 의무 시작

Foreign reporting obligations begin in the first calendar year a person is a U.S. tax resident. Both FBAR and FATCA look at account balances and asset values for the entire calendar year — including periods before the residency start date for the purposes of determining whether thresholds were met.

Foreign Tax Credit — Avoiding Double Taxation 외국납부세액공제 이중과세 방지

The Foreign Tax Credit (Form 1116) is the primary mechanism for eliminating double taxation when both the U.S. and Korea tax the same income. It applies dollar-for-dollar — Korean income taxes paid on income that is also subject to U.S. tax credit directly against the U.S. tax on the same income.

• General basket vs. passive basket: The FTC is calculated separately for "general income" (wages, business income, severance) and "passive income" (interest, dividends, capital gains, rental income). Korean salary and severance taxes credit against the general basket; Korean bank interest and dividend taxes credit against the passive basket. The two baskets cannot cross-apply.
• FTC limitation — cannot exceed U.S. tax on the foreign income: The credit is capped at the proportional U.S. tax on the foreign-source income. If Korean taxes exceed U.S. taxes on the same income (common — Korean top rate is ~49.5% vs. U.S. 37%), the excess credits carry back 1 year and forward 10 years.
• Korean taxes must be legally owed and paid: Only Korean taxes that are legally owed (not refundable) and actually paid or accrued are creditable. Korean withholding taxes (원천징수) on wages, interest, and dividends qualify. Social insurance contributions (건강보험, 국민연금) are generally not creditable as income taxes.
• Documentation needed: 원천징수영수증 (withholding certificates) from Korean employers and financial institutions serve as the primary documentation for Korean taxes paid. Korean bank interest statements and brokerage account tax certificates (계좌 세금영수증) support the passive income basket.

First-Year Election — Option for Late Arrivals 첫해 거주자 선택 §7701(b)(4)

If SPT is not met in the arrival year (because insufficient days were present in the current year to reach 183 on the weighted formula), the First-Year Election may allow the person to be treated as a U.S. resident starting from a chosen date in the arrival year — provided the SPT will be met in the following year.

• Requirements:(1) Not a U.S. resident in the prior year; (2) will be a U.S. resident in the following year; (3) present in the U.S. for at least 31 consecutive days in the election year; (4) present for at least 75% of days from the first day of that 31-consecutive-day period through December 31.
• When the election is beneficial: The election allows the person to file Form 1040 (with the standard deduction and full year credits) rather than a Form 1040-NR dual-status return in the arrival year. If married to a U.S. citizen or resident, combined with the §6013(h) election to file jointly — providing the standard deduction ($32,200 MFJ for 2026) and full MFJ benefits.
• Trade-off of the §6013(h) joint election: Both spouses must report worldwide income for the entire calendar year , including any Korean income earned before the arrival date. If the Korean spouse had significant Korean income from January through the arrival month, the joint election may increase overall U.S. tax compared to non-resident treatment for that period. Model both scenarios.
• Cannot file Form 1040 for the election year until SPT is met in the following year: This means the arrival-year return may need to be filed on extension (Form 4868) if the election is planned — the Form 1040 cannot be filed before SPT is met the following year confirming the election is valid.

Exchange Rate Rules 환율 적용 방법

All Korean won (KRW) amounts must be converted to U.S. dollars for IRS reporting. The IRS does not specify a single required exchange rate method, but requires the taxpayer to use a method applied consistently throughout the return.

• IRS-accepted methods:(1) Annual average exchange rate — the average KRW/USD rate for the calendar year, published by the Treasury Department / IRS (typically the prevailing exchange rate as per Treasury's Financial Management Service). (2) Transaction-date rate — the actual exchange rate on the date each transaction occurred, using the rate from a recognized financial source (Federal Reserve, Bank of Korea, Reuters/Bloomberg). (3) Year-end rate — used for balance reporting (FBAR, FATCA Form 8938 values).
• Consistency requirement: The method selected must be applied consistently across all items in the same category for the return. A taxpayer who uses the annual average rate for salary income must use it for all salary income — not switching to transaction-date rate when it is more favorable for a particular month's payment.
• FBAR exchange rate: For FBAR, accounts are reported in U.S. dollars using the Treasury's Financial Management Service rate for the end of the calendar year, applied to the highest balance during the year.
• Source for rates: The IRS website publishes yearly average exchange rates at irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates. The Bank of Korea also publishes daily and monthly rates at bok.or.kr.

4 Case Examples — Fully Computed 실제 사례 4개

Common Mistakes 자주 발생하는 오류

• 1 Treating the day the SPT formula reaches 183 as the residency start date. The residency starting date under the SPT is the first day of U.S. physical presence in the year SPT is met — not the day the weighted formula crosses 183. An H-1B worker arriving July 1 who meets SPT in October has a July 1 residency start date. Korean income from July 1 onward is reportable; income before July 1 is not — not income before October 15.
• 2 Not splitting income into pre-residency and post-residency periods. Filing Form 1040 and reporting full-year Korean salary (January 1 through December 31) when residency only began in, say, April significantly overstates U.S. taxable income. The Korean income for the non-resident period (January through March) is simply not reportable to the IRS and should not appear on the return.
• 3 Holding Korean mutual funds (펀드) after becoming a U.S. tax resident. Korean mutual funds are typically PFICs — subject to the most punitive tax regime in the U.S. code (excess distribution tax plus compound interest from the year of acquisition). The solution is to liquidate all Korean funds before the residency start date. Once the PFIC problem exists, it requires complex Form 8621 elections to resolve.
• 4 Filing Married Filing Jointly in a dual-status year without making the formal election. Dual-status taxpayers cannot file MFJ without making the explicit §6013(h) election to treat both spouses as U.S. residents for the full year. Filing MFJ without this election is an error that can result in IRS adjustment. The election must be made explicitly with a signed statement attached to the return.
• 5 Not claiming the Foreign Tax Credit for Korean taxes paid on post-move Korean income. Once a U.S. resident, all Korean income earned after the residency start date is reportable — and any Korean taxes paid on that income are creditable via Form 1116. Taxpayers who dutifully report the Korean income but fail to claim the FTC end up paying tax twice on the same earnings — unnecessarily.
• 6 Missing FBAR and FATCA in the first year of residency. Many new U.S. residents are unaware of FBAR and FATCA requirements because these did not apply as Korean residents. The first year of U.S. residency triggers these obligations for the entire calendar year — including Korean account balances from January 1, before the residency start date. Korean bank accounts that exceeded $10,000 aggregate at any point in the year must be reported on the FBAR.
• 7 Not requesting Korean tax documentation (원천징수영수증) before leaving Korea. Once relocated to the U.S., obtaining Korean tax withholding certificates becomes significantly more difficult. These documents are required to support the Foreign Tax Credit claim on Form 1116. Request 근로소득 원천징수영수증 from employers and 이자소득/배당소득 원천징수영수증 from Korean banks and brokerages before departure.
• 8 Not evaluating whether the First-Year Election is beneficial for a late-year arrival. A person arriving in October or November who will not meet SPT in the arrival year may benefit from electing residency under §7701(b)(4) — gaining access to the standard deduction ($32,200 MFJ for 2026) and the ability to file jointly with a U.S. spouse. The trade-off (worldwide income reporting from arrival date for both spouses) must be modeled before choosing.

Hanmi CPA Insight