🌏 How to Report Korean Stocks, Dividends & Funds on Your U.S. Tax Return (2025–2026 Edition)
Investing in Korean stocks, ETFs, or mutual funds while living in the U.S.?
Even if Korean taxes were already withheld, the United States follows a strict global income taxation principle — meaning capital gains, dividends, and fund income from Korea must still be reported on your U.S. tax return.
1️⃣ Are Capital Gains on Korean Stocks Taxable in the U.S.?
Yes. Capital gains from buying and selling Korean stocks are taxable in the United States.
Korea generally does not impose capital gains tax on non-residents for regular stock trades, but the U.S. rules are different.
Korean stock gains must be reported on Form 8949 + Schedule D.
Even if Korea charged zero tax, the U.S. still taxes the gain.
Use the original Korean purchase and sale amounts from your brokerage.
Convert each transaction to USD using the exchange rate on the trade date.
· Sold 100 shares of Samsung Electronics
· KRW 2,000,000 capital gain
Exchange rate: KRW 1,300 → approx. $1,538 gain
→ Reportable and taxable in the U.S.
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2️⃣ How Korean Dividends Are Taxed in the U.S.
Korean dividends are fully taxable in the United States.
Korea usually withholds 15.4%, but this foreign tax generally becomes available as a Foreign Tax Credit (FTC) on your U.S. return.
Most Korean withholding tax is creditable against your U.S. tax liability.
3️⃣ Korean Funds & ETFs — PFIC Rules Explained
Most Korean mutual funds and ETFs are classified as
PFIC (Passive Foreign Investment Company) under U.S. tax rules.
PFICs face punitive tax treatment and potential interest charges if not reported properly.
Missing Form 8621 keeps the IRS audit window open indefinitely
(no statute of limitations).
PFIC reporting is notoriously complex.
If your investment amount is significant, many taxpayers choose U.S.-listed ETFs instead.
4️⃣ Already Paid Korean Taxes? Using the Foreign Tax Credit
Korean dividend withholding (15.4%) can usually be claimed as a Foreign Tax Credit on Form 1116 to prevent double taxation.
Korean dividends: KRW 1,000,000
Korean tax withheld: KRW 154,000 (15.4%)
Exchange rate 1,300 → approx. $118 FTC available via Form 1116.
5️⃣ Documents to Gather & Practical Filing Tips
- 📄 Annual transaction history from Korean brokerages
- 📄 Dividend statements
- 📄 Exchange rate records for each buy/sell date
- 📄 PFIC status check for Korean funds/ETFs
- 📄 Korean tax withholding records (needed for Form 1116)
If you hold foreign accounts or funds, you may also be required to file FBAR (FinCEN 114) and/or FATCA (Form 8938).
Tax rules change frequently due to inflation adjustments and legislation.
Always verify with the latest IRS instructions or consult a registered Enrolled Agent (EA). State tax rules may differ from federal law.
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