[Beginner's Guide] Upcoming Year-End Tax Settlement... Let's Carefully Settle Real Estate Taxes Too

Monthly Rent Payments Eligible for Tax Credit... Up to 900,000 KRW
Subscription Savings, Home Purchase Funds, and Jeonse Loan Interest Also Deductible

[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 is first priority?" For the 2030 'Burin-i (Real Estate + Child)' who only have subscription savings accounts created by their parents when they were young, I am trying to create a guide.

There is one thing you must take care of at the end of the year and New Year's: the year-end tax settlement, also called the '13th month salary.' If you handle it carefully, you can receive money comparable to your salary, but if you do it roughly, you might end up paying more without getting any refund. There are quite a few real estate-related items in the year-end tax settlement. Today, for all Burin-i, I will go over the real estate-related year-end tax settlement items.

There are roughly four major real estate-related year-end tax settlement items: ▲ Monthly rent tax credit ▲ Long-term housing mortgage loan interest repayment income deduction ▲ Housing subscription savings income deduction ▲ Housing lease loan principal and interest repayment income deduction.

The most effective 'Monthly Rent Tax Credit'... Get up to 900,000 KRW back

If you are a tenant, you must definitely claim the monthly rent tax credit. It offers a substantial deduction. You can get a deduction of up to 12% of the total monthly rent paid in a year from your comprehensive income tax amount.

Within a maximum limit of 7.5 million KRW, if your annual earned income is 55 million KRW or less, or business income is 40 million KRW or less, you can get a 12% deduction (up to 900,000 KRW). If your earned income is 70 million KRW or less, or business income is 60 million KRW or less, you can get a 10% deduction (up to 750,000 KRW).

Previously, there were restrictions on the type or size of the house, but from this year, these criteria have been removed. However, the monetary limit still applies, and the standard market price of the residence must not exceed 300 million KRW.

To claim the monthly rent tax credit, you need a resident registration certificate, a copy of the lease contract, and proof of monthly rent payment (such as a bank transfer confirmation). The address on the resident registration certificate must match the address on the lease contract to qualify for the deduction. Also, if you have the lease contract and payment proof, you can claim the deduction without the landlord's consent. Usually, you can claim it even if you do not have a fixed date stamp received when signing the lease contract.

Monthly Rent Tax Credit (Provided by the Ministry of Land, Infrastructure and Transport)

Subscription savings, Jeonse loan, and purchase loan all qualify for 'Income Deduction'

The other three items are all income deductions. First, if you are a salaried worker with a total salary of 70 million KRW or less and are a head of a household without a home, you can get an income deduction of up to 960,000 KRW, which is 40% of the maximum annual payment limit of 2.4 million KRW for housing subscription savings such as housing subscription savings and comprehensive housing subscription savings.

However, if the account is registered under a spouse or others who are not the head of the household, or if the account was terminated early or canceled, you cannot receive the benefit. Also, you must not have owned a house at any time during the year to qualify. The entire household head must have been without a home during this period to get the deduction. Keep in mind that if you terminate the subscription savings after receiving the income deduction, a penalty tax will be imposed.

Housing Savings Income Deduction (Provided by the Ministry of Land, Infrastructure and Transport)

The other two items are income deductions for loan repayments. If you are a head of a household without a home and have borrowed a Jeonse deposit or monthly rent deposit and are repaying it, you can get an income deduction for the principal and interest repayment of the housing lease loan. However, note that the deduction is only available if you rent a house of the so-called 'National Housing Size' of 85㎡ (exclusive area) or less, or a residential officetel. In non-urban areas such as Eup or Myeon, the deduction applies to houses up to 100㎡.

The deduction applies not only to loans from financial institutions but also to money borrowed from individuals. Also, if you are a household member who is not the head of the household, you can claim the deduction for loans in your name if the head of the household has not claimed the related income deduction. The deduction rate is 40% of the principal and interest repayment amount. The maximum deduction limit is 3 million KRW, but note that this limit is combined with the housing subscription savings income deduction limit.

Finally, you can also get an income deduction if you took out a loan to purchase a house. If you are a non-homeowner or a one-homeowner salaried worker and borrow from a financial institution with a long-term repayment period of 10 years or more or 15 years or more within 3 months from the date of ownership transfer registration of the house, you can deduct the interest repayment amount from your income.

You can receive the benefit even if you do not actually reside in the house, and household members who are not the head of the household can also claim the deduction for loans in their name. However, the homeowner and the debtor must be the same person. Also, if you are a household member, you can only claim the deduction for the house you actually live in, and the head of the household must not have claimed the related deduction.

The specific eligibility varies slightly depending on the loan period. Loans taken before 2013 must be for a National Housing Size house with a standard market price of 300 million KRW or less at the time of acquisition. Loans taken between 2014 and 2018 are eligible without size restrictions but must be for houses with a standard market price of 400 million KRW or less. Loans taken after 2019 are eligible only for houses with a standard market price of 500 million KRW or less.

The deduction limit also varies depending on the period and loan method. For loans taken after 2015, if the repayment period is 15 years or more with fixed interest rate and non-grace installment repayment, you can get an income deduction of up to 18 million KRW. However, for loans taken in the same period with a repayment period between 10 years and less than 15 years, the deduction is limited to 3 million KRW per year. Also, note that principal repayments are not eligible for income deduction.

This content was produced with the assistance of AI translation services.