Understanding U.S. Stock Capital Gains Tax in 5 Minutes – How to Calculate It and When to File

That thrilling profit you made from investing in U.S. stocks comes with a very real concern: taxes. Capital gains tax, in particular, is something many people are curious about but also find complicated. And it can be quite frustrating. Even when you look up how to calculate capital gains tax or search for a calculator, the terminology often feels overwhelmingly difficult.

That’s why we prepared this guide—so you can understand everything comfortably in one place without having to look up other articles.

The first key threshold you need to know is “annual net profit of 2.5 million KRW.”
If your final net profit from selling U.S. stocks over the past year—the profit you actually realized—does not exceed 2.5 million KRW, you do not need to pay capital gains tax this year. In this case, you are also exempt from the obligation to file a capital gains tax return, so there is nothing you need to worry about.
In other words, no matter how much the market value of the stocks you are holding has gone up (unrealized gains), if you have not actually sold them, no capital gains tax arises for that year.
Conversely, if your final net profit exceeds 2.5 million KRW, tax will be levied on the portion above that threshold.

We now know that it’s important to check whether your final net profit is 2.5 million KRW. So how can you figure out your own “final net profit”? The basic calculation principle is as follows.

You can easily check this information in the MTS (Mobile Trading System) or HTS (Home Trading System) provided by your brokerage firm.

TIP. What counts as “necessary expenses”?

As shown in the formula above, “necessary expenses” literally means the costs that were unavoidably incurred in the process of buying and selling stocks. A typical example is the “trading commission” you pay to your brokerage. (In some overseas markets, local transaction taxes may be included, but for U.S. stocks you can mainly think of trading commissions.)

You can also find these necessary expenses in the transaction history or annual trading report in your brokerage’s MTS or HTS. The most accurate approach is to rely on the official documents provided by your brokerage.

How to Check in MTS/HTS

Once you run the search, you’ll be able to see in detail the purchase/sale amounts, commissions, and profit or loss for each trade during that period.

What if I Have Both Gains and Losses? Understanding Netting of Gains and Losses

What should you do if, over the course of a year, you traded multiple stocks and had gains on some and losses on others?

In that case, you add up all gains and losses for the year to calculate your final net profit. This is called “netting of gains and losses.” In other words, you can subtract the loss amounts from your gains, which helps reduce your tax burden.

If your final net profit exceeds 2.5 million won, you now need to calculate the tax. The formula is as follows.

TIP. What Korean residents investing in U.S. stocks don’t need to worry about
For U.S. residents, different tax rates apply depending on whether the holding period is 1 year or less (short-term) or more than 1 year (long-term), and joint filing as a married couple is also possible. For Korean residents, however, a single flat tax rate of 22% (including 2% local income tax) applies.

The filing and payment period for capital gains tax on foreign stocks is fixed. You need to be careful not to miss it.

TIP. Beware of penalties for incorrect filing or late payment

Penalty for non-compliant filing: If you fail to file on time (non-filing) or underreport your tax, a substantial percentage of the tax originally due (for example, 20% of the tax due in the case of non-filing) may be added as a penalty. (Higher penalty rates apply in cases of intentional tax evasion.)

Penalty for late payment: If you file but pay late, a penalty similar to daily interest (for example, 0.022% per day) will be added for the period of delay.

Dividend income tax is separate

If you have received dividends from U.S. stocks, you may be wondering how dividend income tax is handled. Tax on dividends (dividend income tax) is levied separately from capital gains tax. For U.S. stocks, dividend income tax is generally withheld at source in the local market before you receive the payment, so you do not need to include dividend income when calculating your capital gains tax.