[Practical Finance] Soaring Comprehensive Real Estate Tax... How to Save Even a Single Won of This Valuable Tax

This Year Again 'Property Tax Bomb'... Annual Sharp Increase
Massive Taxes Make Comprehensive Real Estate Tax Savings Essential
Consider Selling Low-Benefit Real Estate Before June
Increase in Burdened Gift Transfers to Reduce Capital Gains Tax
Name Dispersion and Large Deductions Also Lead to Designation as Major Taxpayer

[Asia Economy Reporter Moon Jiwon] This year, as the publicly announced prices of apartment complexes nationwide rose by more than 19%, concerns are growing that the burden of comprehensive real estate tax linked to these prices will also increase significantly. The number of apartment units nationwide with publicly announced prices exceeding 900 million KRW, which is the threshold for imposing the comprehensive real estate tax, was counted at 524,620 units this year. Compared to the previous year (309,361 units), this represents a sharp increase of 69.6% in just one year. In Seoul, where there are many high-priced homes, 413,000 units, accounting for 16.0% of all apartment complexes, are subject to the comprehensive real estate tax.

According to the 'Roadmap' announced by the government last year, the realization rate of apartment publicly announced prices will rise to 90% by 2030. This means that the rapid increase in holding tax burdens, like this year, is likely to be repeated annually. Therefore, it is analyzed that homeowners are practically required to consider ways to reduce their holding tax burden even by a small amount.

For homes with little practical benefit, selling before June reduces taxes

Since the comprehensive real estate tax is a tax paid for owning a home, the most representative tax-saving method for multi-homeowners is to dispose of homes with little practical benefit. Homeowners pay property tax in July and September, and if the total publicly announced price of their homes exceeds 600 million KRW (900 million KRW for single-home households), they pay an additional comprehensive real estate tax in December. Property tax and comprehensive real estate tax are structured to impose one year's tax on the person owning the home as of June 1 each year. Therefore, if the home is sold or gifted before June 1, the holding tax can be avoided.

From June 1, the capital gains tax burden on multi-homeowners in regulated areas is expected to increase up to 75% (for those owning three or more homes), so multi-homeowners may benefit from quickly disposing of real estate they plan to sell. When disposing, it is cost-effective to handle properties with smaller tax burdens first, such as those with smaller capital gains. If home prices are expected to rise further or if selling is difficult, ownership can be distributed through family gifting.

In fact, the industry expects that even if the holding tax burden rises, the market will not be shaken by a flood of tax-saving listings because the pace of house price increases is expected to be faster. If gifting is chosen, the tax burden varies greatly depending on the recipient, timing of transfer after gifting, market price and publicly announced price at the time of gifting, and whether the gift includes liabilities.

Active use of burdened gifts to avoid holding tax... Consider gift tax

In particular, burdened gifts are one of the methods frequently considered by homeowners who are weighing high capital gains tax against gift tax. A burdened gift transfers debts such as jeonse deposits along with the gift, which disperses the tax base used for taxation and can lower the tax rate. According to experts, the tax difference between general gifts and burdened gifts can exceed hundreds of millions of KRW.

It is also advantageous to gift before the announcement of publicly announced prices. When acquiring real estate through gifting without payment, gift tax is imposed, and the gifted real estate is evaluated based on sales prices, appraised values, or comparable sales prices occurring from six months before to three months after the gift date. If such data is unavailable, the publicly announced price is used for evaluation. For detached houses or multi-family houses, which are not apartments, comparable sales data is usually scarce, so gift tax is reported based on the publicly announced price.

However, choosing gifting to reduce comprehensive real estate tax is not always advantageous. Since August last year, the acquisition tax rate for gifts of homes worth over 300 million KRW in regulated areas rose to 12%, and if the real estate market undergoes adjustment due to policy effects, selling may become more favorable.

From this year, choice between joint ownership and sole ownership available

The comprehensive real estate tax is imposed on an individual basis rather than household basis. Therefore, whether the property is jointly owned or solely owned has a significant impact on the tax. According to the comprehensive real estate tax law, if a property is jointly owned by a married couple, each spouse receives a basic deduction of 600 million KRW, totaling 1.2 billion KRW. In contrast, for a single-home household with sole ownership, a basic deduction of 900 million KRW is applied, along with elderly and long-term holding deductions.

For example, if a home has a publicly announced price of 1.1 billion KRW, a married couple owning it jointly with 50% shares each would not pay comprehensive real estate tax, but if owned solely, tax would be imposed on 200 million KRW.

From this year, married couples with 50-50 ownership shares can choose the taxpayer who benefits more from elderly and long-term holding deductions for comprehensive real estate tax savings. Previously, joint ownership by spouses did not allow elderly or long-term holding deductions, which was advantageous for tax savings early in home ownership but became disadvantageous compared to sole ownership as the owner's age increased and holding period lengthened. The deduction rate for elderly persons aged 60 or older is 20-40%, and the long-term holding deduction for those holding over five years is 20-50%. Receiving both deductions can provide up to an 80% deduction.

However, now if the ownership shares are equally 50-50, the taxpayer can be selected. That is, designating the spouse who can receive greater elderly or long-term holding deductions as the taxpayer can reduce the annual comprehensive real estate tax burden, so it is necessary to carefully consider individual circumstances. The application period for single-home taxpayers is from September 16 to 30 each year, and applications are submitted to the local tax office.

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