[Exclusive] Non-Household Heads' Monthly Rent Tax Credit... Ruling and Opposition Parties Rush to Propose Youth Housing Cost Relief Bills

Expansion of Deductible Cohabitants
Increase in Income Requirements and Total Limit
Ruling and Opposition Parties Propose Amendment to Special Tax Treatment Act

[Image source=Yonhap News]

[Asia Economy Reporters Hyunju Lee and Juni Park] The ruling and opposition parties are preparing bills to expand the scope of monthly rent tax credits and raise income requirements, total limits, and tax credit rates to alleviate the housing cost burden on youth and low-income groups. This reflects the housing market trend where monthly rent prices are continuously rising and there is a rapid shift from jeonse (key money deposit lease) to monthly rent due to increased bank interest burdens.

According to political circles on the 14th, Kim Ju-young, a member of the Democratic Party of Korea, will soon propose an amendment to the Restriction of Special Taxation Act to allow cohabitants who are not household heads to receive monthly rent tax credits.

Under current law, the recipients eligible for monthly rent tax credits are limited to household heads and household members if the household head does not claim the credit. However, cohabitants who are not household members but share the rent are currently excluded from receiving the tax credit, and the amendment aims to include them as eligible recipients.

Kim Ju-young said, "In areas with many universities or workplaces, young people often cohabit to reduce monthly rent burdens. Excluding the monthly rent paid by cohabitants from the tax credit is unfair from an equity perspective."

The demand for relief from monthly rent burdens is expected to grow further as the Bank of Korea recently raised the base interest rate by 0.5 percentage points at once. The increased interest burden on financial loans is causing more cases of switching from jeonse to monthly rent.

Earlier, Democratic Party lawmaker Jung Tae-ho proposed a partial amendment to the Housing Benefit Act to support the reduction of jeonse and monthly rent costs for youth housing stability. This allows youths aged 19 to under 30 to apply for separate rental support when they have reasons such as schooling or job seeking.

The ruling party is also pushing to expand the scope of monthly rent tax credits. Ryu Seong-geol, chairman of the People Power Party’s Special Committee on Price and Livelihood Stability, will soon propose an amendment to the Restriction of Special Taxation Act related to monthly rent tax credits.

Currently, monthly rent tax credits apply only to workers with a total annual salary of 70 million KRW or less (comprehensive income of 60 million KRW). The amendment plans to expand this eligibility and increase the total limit of 7.5 million KRW. The tax credit rate will also be raised to a maximum of 15%.

In a phone interview, Ryu said, "When the monthly rent tax credit eligibility was expanded in 2014 (from 50 million KRW to 70 million KRW annually), we are reviewing statistical data to see which current workers’ income corresponds to that level. Considering inflation, we will expand the total salary criteria and raise the limit accordingly."

People Power Party lawmaker Jo Su-jin also proposed a bill last month to raise the tax credit rate from the current 10-12% to 12-15%. Jo explained the legislative proposal by saying, "With rapid inflation and a sharp rise in interest rates, the housing cost burden on the homeless is increasing, so this is to reduce housing costs for the homeless and provide practical benefits."

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