Make Sure to Include Subscription Savings, Jeonse Loans, and Monthly Rent in Your Year-End Tax Settlement [Practical Finance]

Up to 960,000 KRW Income Deduction with Subscription Savings Account
Jeonse Loan Principal and Interest Repayment Deductible up to 40%
Full Deduction for Mortgage Loan Interest Repayment

Although convenience has increased, allowing all year-end tax settlement processes to be completed with a single click, many people overlook the real estate-related year-end tax settlement sections. Jeonse loans, monthly rent, subscription savings, and mortgage loan interest are all deductible. By utilizing these well, non-homeowners can prepare next month's rent, and homeowners can also receive additional "13th month rent."

◇Up to KRW 960,000 deduction with the ‘Subscription Savings Account’ everyone has= About 28 million people have opened and paid into subscription savings accounts to prepare for home ownership, which is a representative product eligible for year-end tax settlement (housing subscription savings income deduction) benefits.

The amount paid into the subscription savings account can be deducted up to 40% of the payment amount within an annual limit of KRW 2.4 million (maximum KRW 960,000). For example, if KRW 100,000 is deposited monthly into the subscription savings account, an income deduction of 40% of KRW 1.2 million, which is KRW 480,000, is applied. To receive the subscription savings income deduction, a non-homeowner certificate must be issued by the bank where the subscription savings account was opened and submitted to the handling institution by February.

However, to receive the subscription savings income deduction, the total salary must be KRW 70 million or less, and the applicant must be a non-homeowner head of household. All family members living in the same household, including spouse, children, and parents, must be non-homeowners. Even if the spouse lives separately, if the spouse owns a home, the housing subscription savings deduction cannot be claimed.

◇Jeonse loan principal and interest repayment up to 40% deductible= Tenants living in jeonse or monthly rent housing should actively utilize income deductions. The principal and interest repayment income deduction for housing lease loans applies to non-homeowner heads of households who have rented a national housing-sized home (85㎡ or less) and have earned income, when they borrow jeonse or monthly rent deposits from lending institutions and repay the principal and interest.

To receive the deduction, the loan amount must be directly deposited from the lending institution to the landlord's account. If conditions are met, up to 40% of the repayment amount within an annual limit of KRW 3 million can be deducted. However, this is only available to non-homeowner heads of households, and the amount deducted from the subscription savings account is combined to determine the limit.

If the total salary does not exceed KRW 50 million, deductions can also be claimed for amounts borrowed from individuals such as friends or family (principal and interest repayment of housing lease loans). The loan must be taken within one month before or after the earlier date between the contract move-in date and the resident registration move-in date, and the annual interest rate must be at least 1.2%. However, when borrowing from individuals, proof documents must be prepared directly. Required documents include housing loan repayment certificates, resident registration copies, lease contract copies, loan agreement copies, and principal and interest repayment proof documents (such as account transfer details).

◇Monthly rent paid for 5 years can also be claimed for tax credit= Non-homeowner heads of households with a total salary of KRW 70 million or less can get a refund for monthly rent paid through year-end tax settlement. Renting a national housing-sized home (85㎡ or less) or a home with a standard market price of KRW 300 million or less allows a 10% tax credit on monthly rent (up to KRW 7.5 million annually). If the total salary is KRW 55 million or less, a 12% credit is applied. This means benefits up to KRW 900,000. Eligible homes include residential officetels and gosiwons. To receive the monthly rent tax credit, the leased home address and the resident registration address must match, and the year-end tax settlement applicant and the monthly rent payer must be the same.

It should be noted that monthly rent tax credits and housing-related income deductions (principal and interest repayment of housing lease loans, long-term mortgage loan interest repayment, housing subscription savings payments, etc.) cannot be claimed simultaneously within one household. Monthly rent amounts claimed for tax credit cannot also be claimed for income deduction through credit card or cash receipt usage.

Landlord consent or a fixed date is not a mandatory condition for the deduction. If it is inconvenient to apply during the residence period due to landlord concerns, the application can be made within 5 years after moving out.

◇Full deduction of mortgage loan interest repayment= Just as jeonse loans are deductible, principal and interest repayments on mortgage loans are also deductible.

To receive the long-term mortgage loan interest repayment income deduction, the applicant must be a head of household owning no home or one home, and the standard market price of the home at acquisition must be KRW 400 million or less (KRW 500 million or less for acquisitions after 2019). The deduction is based on the standard market price at acquisition, regardless of the current market price.

The deduction limit ranges from KRW 3 million to KRW 18 million depending on the repayment period and method. Only loans borrowed from financial institutions and the Housing and Urban Fund are recognized. Additionally, only loans borrowed within 3 months from the date of housing ownership transfer registration or preservation registration are recognized.

Even if you discover missed items related to real estate year-end tax settlement, there is no need to give up. Missed items can be reported together during the comprehensive income tax filing period in May. Additional deductions can be claimed through ‘comprehensive income tax base final report’ or ‘amended claim.’ The omitted real estate-related deduction items can be reflected when filing the comprehensive income tax base final report with the head of the tax office having jurisdiction over the address.