[Real Estate Finance] Bonus or Bomb... Prepare Your Year-End Tax Settlement for Real Estate in Advance

If You Are a Tenant Without a House
40% Deduction on Subscription Savings Contributions
Monthly Rent Tax Credit Rate Also Rises by 2~3%
Up to 4 Million KRW Benefit on Loan Repayment

What Eolguka Must Claim
Mortgage Interest Deduction for One-Homeowners
Up to 18 Million KRW Income Deduction on Loan Interest
Real Estate Brokerage Fees Deductible up to 30%

[Asia Economy Reporter Kim Hyemin] As the year-end tax adjustment period approaches, many office workers have started crunching the numbers. This year, everyone is looking for their own tax-saving methods to avoid giving back their salary. One important point to note is that if you make good use of the house you live in, you can effectively enjoy the "13th month salary" effect. Monthly rent, jeonse (key money deposit), and Yeongkkeuljok (those who borrow to the limit, even their soul, to buy a house) can all be eligible. Especially this year, since limits and other conditions have changed, you need to check carefully. Here is a summary of key points related to real estate for year-end tax adjustment that you should not forget.

◆ If you put 200,000 KRW monthly into a subscription savings account, you can get a 960,000 KRW deduction = The subscription savings account (Jutaek Cheongyak Jonghap Jeochuk), which those dreaming of owning a home open first, is a representative item that receives income deduction benefits during year-end tax adjustment.

Income deduction is available up to 40% of the annual payment amount within a limit of 2.4 million KRW. For example, if you deposit 200,000 KRW monthly into the subscription savings account, you can get an income deduction of 960,000 KRW, which is 40% of 2.4 million KRW. Since the deduction is based on the amount paid in a year, even if you deposit 2.4 million KRW at once at the end of the year to enjoy tax benefits, the effect is the same.

However, not everyone can receive this benefit. First, owners of one or more houses are excluded from the income deduction even if they have the account. You must be a head of a household without a house during the taxable year, and the no-household condition includes cohabitants. Income level is also considered. Only those with an annual total salary of 70 million KRW or less can enjoy the income deduction benefit.

◆ You can get back 15% of the monthly rent you pay = If you live in a rented house, you must claim the "monthly rent tax credit." Of course, there are conditions. First, you must be a head of a household without a house with a total salary not exceeding 70 million KRW. Also, the rental house must be a national housing unit (exclusive area 85㎡ or less) or a rental house with a standard market price of 300 million KRW or less.

In this case, you can receive a tax credit of up to 12% within the annual rent amount limit of 7.5 million KRW. However, if your comprehensive income exceeds 60 million KRW, you are excluded. If your total salary is 55 million KRW or less (comprehensive income 45 million KRW), the deduction rate rises to 15%. Originally 10% or 12%, the deduction rate was raised in the 2022 tax law amendment. However, the increased deduction rate will apply only if it passes the currently ongoing National Assembly discussions.

If the head of the household did not claim the deduction, a household member can claim it instead. However, within one household, you cannot receive both the monthly rent tax credit and other housing-related income deductions simultaneously. Eligible houses include apartments, detached houses, multi-family houses, and multi-unit houses, as well as officetels, goshiwons, and public rental housing. However, the address on the lease contract and the resident registration must be the same, and the year-end tax adjustment applicant and the rent payer must be identical.

You can apply with just the monthly rent lease contract and proof of rent payment without the landlord's consent. It is possible even without a fixed date stamp, and if you fail to report in the relevant year, you can claim the deduction within five years.

◆ Jeonse loan principal and interest repayment can get up to 4 million KRW income deduction = Jeonse residents can also receive income deduction benefits during year-end tax adjustment.

The principal and interest repayment income deduction for housing lease loans applies to wage earners who are heads of households without a house living in a house with an exclusive area of 85㎡ or less, who borrowed a jeonse deposit from a lending institution and repaid the principal and interest.

If it is confirmed that the loan amount was directly deposited from the lending institution to the landlord's account, you can receive a deduction of 40% of the repayment amount within an annual limit of 4 million KRW. The previous limit was 3 million KRW, and this is also subject to National Assembly discussions. However, remember that the amount deducted from the subscription savings account is combined with this to set the limit.

◆ Burden of high-interest mortgage loan interest... Aim for deduction on repayment amount = Due to the rapid rise in the base interest rate over the past year, those burdened by mortgage loan interest should check the "long-term housing mortgage loan interest repayment income deduction" item. If you are a wage earner and head of a household with one or fewer houses, you can receive an income deduction on part of the loan interest you repaid this year.

The standard market price of the house at acquisition must be 500 million KRW or less. If purchased before 2019, houses priced 400 million KRW or less are eligible. The loan repayment period (loan term) must be at least 10 years, and the deduction limit ranges from 3 million to 18 million KRW depending on the repayment period. For example, if the repayment period is 15 years or more and you repay with a fixed interest rate and non-grace installment method, i.e., starting principal repayment immediately after borrowing, you can receive an income deduction of 18 million KRW.

Only loans borrowed from financial institutions and the Housing and Urban Fund are recognized. Only amounts borrowed within three months from the date of housing ownership transfer registration or preservation registration are recognized. Even if you are not the head of the household, if a household member owns the house and you have a mortgage loan in your name and live there, you can receive the income deduction.

◆ Brokerage fees are also income deductible = Brokerage fees incurred during real estate transactions can also be income deductible. What you must keep is the cash receipt. Most brokerage fees are paid in cash or bank transfer on site, and if you keep the cash receipt, you can receive a 30% income deduction during year-end tax adjustment. The cash receipt also helps reduce capital gains tax when you sell the house later by reflecting the brokerage fee amount.

If you did not receive a cash receipt at the time of the transaction, you can request issuance from the broker. Real estate brokerage is a business required to issue cash receipts, and if the brokerage fee is 100,000 KRW or more, they must issue it. If they refuse, you can report it to the National Tax Service's Hometax system, and the reporter can receive a reward. You can also check whether the cash receipt was properly issued by viewing the cash receipt usage history on Hometax.