Virtual Currency Taxes: Comparing Korea and the U.S.
- yunseo sung
- Feb 17
- 3 min read
Updated: Feb 22
Yunseo Sung (US CPA and Korean CTA)
Cryptocurrency is now part of everyday life—but what does that mean for your taxes? In this post, we’ll explain in simple terms how virtual currency is taxed in Korea and the U.S., using real-world examples. We’ll also touch on key reporting requirements like FBAR and highlight important dates and tax rates.
Quick Overview
Why Tax Crypto?Governments tax cryptocurrencies because they have real value. Every time you sell, trade, or use crypto to buy something, you might incur a tax bill.
Different Rules in Korea and the U.S.Each country treats crypto differently. Korea is still finalizing its rules—with crypto gains deferred for transactions before January 1, 2027—while the U.S. has established guidelines that treat crypto as property.
FBAR Reporting:U.S. persons must report any foreign financial accounts or crypto held on foreign exchanges if the total value exceeds $10,000 at any point during the year.
Case 1: An American Living in Korea
Scenario:John is an American citizen who now lives in Korea and is considered a Korean tax resident. He holds some Bitcoin and uses it for occasional transactions and investments.
What John Needs to Know:
Korean Tax Residency:As a resident of Korea, John is subject to Korean tax rules. This means any gains from his crypto transactions will be taxed by Korea—even if he originally acquired his crypto in the U.S.
Tax Rates & Reporting:
Gains: When John sells his Bitcoin at a profit, that gain will be taxed by Korea at the applicable rate (current proposals suggest around 20% on crypto gains above certain thresholds).
Deferral: Korea has deferred crypto taxation for gains from transactions occurring before January 1, 2027. However, any transactions after that date will be subject to tax.
Record Keeping: John should keep detailed records of every transaction (dates, amounts, and values) to ensure accurate reporting to Korean tax authorities.
U.S. Tax Filing Obligations:As a U.S. citizen, John must file U.S. tax returns every year, reporting his worldwide income—including any crypto-related gains—even though he is now a Korean tax resident.
FBAR Reporting:If John holds any accounts or keeps crypto on exchanges outside of the U.S., he may need to file an FBAR if the total value exceeds $10,000 at any point during the year.
Case 2: A Korean Living in the U.S.
Scenario:Min-ji is a Korean citizen living in the U.S. who actively invests in several cryptocurrencies.
What Min-ji Needs to Know:
U.S. Tax Residency:As a resident of the U.S., Min-ji is subject to U.S. tax laws. The IRS treats crypto as property, so each sale or trade is a taxable event.
Tax Rates & Reporting:
Capital Gains: Profits from selling crypto are taxed as capital gains. If Min-ji holds her crypto for less than a year, any gains are considered short-term and taxed at her ordinary income rate (which can range from 10% to 37%). For assets held longer than a year, long-term capital gains rates (typically 0%, 15%, or 20%) apply.
Ordinary Income: If she receives crypto as payment or earns it through mining, the fair market value at the time of receipt is considered ordinary income.
Record Keeping: Min-ji should maintain detailed records of all crypto transactions, including purchase and sale dates and values.
FBAR Reporting: If Min-ji holds crypto on exchanges located outside of the U.S. (for example, on Korean exchanges), and if the total value of these accounts exceeds $10,000, she must file an FBAR.
Key Takeaways
Residency Determines the Rules: Your tax obligations for crypto depend on where you live. Americans living in Korea follow Korean tax rules, and Koreans living in the U.S. follow U.S. tax rules.
Different Tax Rates and Systems: In the U.S., crypto is taxed as property with capital gains rules in place. In Korea, gains are expected to be taxed at around 20% once the deferral period ends, and the system is still evolving.
Reporting is Crucial: Good record keeping is a must. Additionally, U.S. citizens and residents must comply with FBAR reporting if they hold foreign accounts or crypto on overseas exchanges.
Stay Informed: Cryptocurrency tax rules are changing fast. In Korea, for instance, any gains from transactions after January 1, 2027, will be taxed. Make sure to keep up with updates from the Korean National Tax Service and the IRS.
Final Thoughts
Navigating crypto taxes might seem complicated, but understanding the basics can help you avoid unexpected bills. Whether you’re an American living in Korea or a Korean living in the U.S., being aware of your tax responsibilities and keeping good records is key. Always consider consulting a tax professional who understands cross-border issues for personalized advice.
Disclaimer: This post is for general informational purposes only and does not constitute tax advice. Please consult a qualified professional for advice tailored to your specific situation.
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