[Burini Guide] Is the 5.55 Million Won Monthly Hurdle for First-Time Special Supply 'Pre-Tax' or 'Post-Tax'?

[Asia Economy Reporter Lee Chun-hee] When you become a real estate reporter, you often get unexpected KakaoTalk messages from friends. "How do I apply for a housing subscription?" "What does first priority mean?" For the 2030 'Burin-i (Real Estate + Beginner)' who only have subscription savings accounts created by their parents when they were young, I am going to create a guide.

As the number of special supply categories for first-time homebuyers is set to increase, interest among Burin-i in various special supplies is gradually growing. Today, we will look into one of the most important hurdles to overcome to win a special supply: the income criteria.

Generally, based on national housing standards, the income criteria for winning a subscription are set at 100% of the previous year's average monthly income per household of urban workers for general supply and first-time homebuyer/newlywed (single-income) special supply, and 120% of the average monthly income for special supplies such as elderly parent support, multi-child families, and newlywed (dual-income) special supply. Today, we will learn how to check this average monthly income.

To apply for first-time special supply, you must not earn more than 5.55 million KRW per month

Average Monthly Income per Urban Worker Household in the Previous Year Based on 2020, Published in the Tenant Recruitment Announcement (Provided by LH)

First, let's understand the 'alpha and omega' of the income criteria: the previous year's average monthly income per household of urban workers. This figure is based on data from the 'average monthly household income and expenditure by household size' in the Household Income and Expenditure Survey conducted quarterly by Statistics Korea. Since the survey is conducted quarterly, the annual income is calculated as the average of the four quarters' income. For reference, an urban worker household refers to a household residing in an urban area where the head of the household is a wage earner.

According to Statistics Korea, the average monthly income per household by household size of urban workers for the previous year (2019) is ▲1-person household: 2,645,147 KRW ▲2-person household: 4,379,809 KRW ▲3-person household: 5,626,897 KRW ▲4-person household: 6,226,342 KRW ▲5 or more persons: 6,938,354 KRW. In the actual subscription process, for households with 5 or more members, an additional 655,729 KRW is added for each additional member based on the 100% standard, so the criteria for 6-person, 7-person, and 8-person households are 7,594,083 KRW, 8,249,812 KRW, and 8,905,541 KRW, respectively.

After this 100% income, the criteria vary depending on how many percentage points are added or subtracted. Currently, the lowest standard is the 50% average monthly income used for the first priority in public rental housing special supply. For a 3-person household, if the income exceeds 1,875,632 KRW, applying for the first priority in public rental housing special supply is not possible.

However, recently, problems have arisen due to these standards. Currently, in subscription housing applications, the standards for 1- and 2-person households are generally merged with those for 3-person households, but for rental housing, separate standards are strictly applied for 1- and 2-person households. Last year, to prevent a reversal phenomenon where a single-person household earning 5.4 million KRW per month meets the 100% income standard while a 3-person household exceeds the standard with only 1.85 million KRW per person, the government decided to apply the same income standard for 1- and 2-person households as for 3-person households, and this regulation has been implemented since this year.

On the other hand, in the public rental special supply where 50% of the average monthly income is applied, a side effect appeared where the income standard for moving in was below the minimum wage of 1,795,310 KRW. Applying 50% of the average monthly income per household of urban workers results in 1,322,354 KRW for a single-person household.

To fix these side effects, last month, Seoul City announced that it would raise the first priority income standard for public and private rental special supply in station-area youth housing from 50% to 100% of the average monthly income, and the Ministry of Land, Infrastructure and Transport also announced plans to revise related enforcement regulations by December to raise the income standards for 1- and 2-person households.

'Pre-tax'? 'Post-tax'? ... Strictly speaking, neither

Many Burin-i may be confused because the average monthly income per household of urban workers used here does not match the actual wages they receive. This time, let's check how much the actual wages and recognized amounts differ based on the 'monthly wage' of the National Health Insurance Corporation, which is most prioritized by the Korea Land and Housing Corporation (LH) when calculating earned income.

The monthly wage for health insurance can be checked through the National Health Insurance Corporation website under Civil Application → Individual Civil Affairs → Inquiry/Issuance → Workplace Insurance Premium Individual Inquiry. Besides this, the average monthly wage for industrial accident and employment insurance from the Korea Workers' Compensation & Welfare Service, the standard monthly income from the National Pension Service, the monthly wage from the Korea Employment Agency for the Disabled, and the earned income from the National Tax Service's comprehensive income are sequentially reflected.

The most important question is whether this standard is 'pre-tax' or 'post-tax.' The standard is 'pre-tax.' It is based on the pre-tax total salary, which is the annual salary before taxes and the four major social insurance premiums are deducted, divided by 12 months.

Among the National Tax Service's earned income payment statements, there is a separate item for non-taxable and exempt income. (Source: National Tax Service Hometax)

However, when you actually check the monthly wage, it is often somewhat lower than the pre-tax total salary. This is because the actual monthly wage excludes 'non-taxable income' from the pre-tax total salary. Non-taxable income includes reimbursements, meal allowances, pay for overtime, night, and holiday work, and childcare allowances for children under six years old. Reimbursements include ▲research assistance and research activity expenses for teachers ▲reporting allowances for reporters ▲work clothes expenses ▲hazard pay for police officers, firefighters, and soldiers.

Note that some non-taxable income is not fully exempt from tax; for example, meal allowances have a non-taxable limit of 100,000 KRW, and childcare allowances also have a 100,000 KRW non-taxable limit per allowance.

Therefore, even if the head of a 3-person household with a single income earns 5.7 million KRW in pre-tax total salary per month, if this includes 100,000 KRW for meal allowance and 100,000 KRW for childcare allowance, the monthly wage would be 5.5 million KRW, which is below 100% of the average monthly income per household of urban workers. This makes it possible to apply for general supply, first-time homebuyer, and newlywed (single-income) special supply for national housing.

However, since the standard is not 'average monthly earned income per household of urban workers,' if there is separate income from agriculture, forestry, or fisheries, or if there is rental, interest, pension income, or various allowances and pensions received by law (public transfer income) exceeding 55,000 KRW, the total income may exceed 100%, making application impossible. Therefore, you should carefully check other incomes besides earned income.