[2023 Tax Reform] Expansion of Income Deduction for Long-term Mortgage Loan Interest... Promoting Housing Stability

Starting next year, the maximum limit for income deduction on interest repayment of long-term housing mortgage loans will be raised from 18 million KRW to 20 million KRW. The annual payment limit for income deduction on the Housing Subscription Savings will also be expanded from 2.4 million KRW to 3 million KRW.

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On the 27th, the government announced the '2023 Tax Law Amendment' containing these details. The aim is to reduce the burden on low- and middle-income households by increasing the income deduction limits related to housing and to restore the livelihood economy.

The income deduction limit for interest repayment on long-term housing mortgage loans, applicable to workers with no home or one home, will increase from the current 3 million to 18 million KRW to 6 million to 20 million KRW. This is expected to help low-income earners who have purchased their homes through long-term loans, so-called 'Yeongkkeul' (borrowing to the limit).

Specifically, for repayment periods of 15 years or more, the maximum limit for fixed interest rate + non-grace period loans will increase from 18 million KRW to 20 million KRW, and if either condition is met, the limit will increase from 15 million KRW to 20 million KRW. For other cases such as variable interest rate or grace period loans, the limit will be recognized up to 5 million KRW to 8 million KRW. For fixed interest rate or non-grace period loans with a repayment period of 10 years or more, the limit will rise from 3 million KRW to 6 million KRW.

The housing price criterion will be adjusted from market price of 500 million KRW or less to 600 million KRW or less. Both the deduction limit and housing requirements will apply to payments or acquisitions made from January 1 of next year.

To support home purchase for workers without homes, the income deduction limit for Housing Subscription Savings will also be raised from 2.4 million KRW to 3 million KRW annually for payments made from January 1 next year. The method remains the same, deducting 40% of the payment amount from earned income for workers who are heads of households without homes and have a total salary of 70 million KRW or less. The application period is until the end of December 2025.

The special application period for deemed rental income, which serves as the basis for taxation on jeonse (key money deposit) or security deposits received by owners of three or more homes, will also be extended. The government has excluded small housing units with exclusive area of 40㎡ or less and market price under 200 million KRW from the number of houses and deemed rental income taxation. The special measure was originally scheduled to expire at the end of this year, but to support housing stability through the supply of small rental housing, the application period will be extended until December 31, 2026.

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