Year-end real estate tax breaks, from rent to mortgage refunds

we've rounded up the best real estate tax breaks. from the rent tax credit to the mortgage deduction to the mortgage interest deduction, renters and homeowners alike won't want to miss out.

as the end of the year approaches, the first word on most people's minds is taxes. it's the difference between a paycheck in December and a tax burden in January, and in recent years, real estate has become an increasingly important part of the year-end process, especially as financial activities related to real estate have become more commonplace, such as renting, buying, and lending.

despite this, many people miss out on real estate-related tax savings because they don't own a home yet, or because they think their company will take care of it for them. whether you own a home or a single-family home, whether you rent or buy, or even if you only have a savings account, there are still taxes you can reclaim at the end of the year.

the rent credit for renters

for those who don't own a home, the most realistic year-end real estate tax savings is the rent credit. if you're burdened by the amount of rent you pay each month, getting this item right can significantly reduce your out-of-pocket expenses.

the rent credit is available to those who own their own home and earn a gross salary of KRW 80 million or less per year. you must live in a house with a dedicated area of 85 square meters or less or a base market value of 400 million won or less, and office buildings and government offices are included as long as they are actually residential.

you can receive a tax credit of 15 percent or 17 percent, depending on your salary, of the monthly rent you paid in the tax period, up to a limit of 10 million won. you can get a refund of several hundred thousand won to more than 1 million won, but you must check the name on the lease and whether you have moved in.

deduction for mortgage principal payments for renters

if you have a mortgage, you may be able to deduct your mortgage payments. it applies to homeowners who borrow from a financial institution or the Housing and Urban Fund, and you can deduct 40 percent of your annual payments, up to a maximum of $4 million.

however, if the amount exceeds KRW 4 million combined with the housing savings deduction, the excess is not allowed. The borrower must be homeless at the time the loan was executed and it must be clear that the loan was paid directly to the landlord.

deduction for interest payments on long-term mortgage borrowings for single homeowners

if you're a single homeowner, the mortgage interest deduction is key. it applies to loans taken out to purchase a home with a basis of 600 million won or less, and the annual deduction depends on how long and how the loan is repaid.

it does not apply to two or more homes, including those owned by the head of household and household members, and excludes office buildings. if you change your repayment plan or take out a refinance loan midstream, your deduction requirements may change, so check your loan structure.

homeownership savings deduction for savings account holders

even if you haven't bought a home yet, you may be eligible for a tax break if you have a savings account. if you're a homeowner and earn a gross salary of KRW 70 million or less, you can deduct 40 percent of your annual contributions, up to a maximum of KRW 3 million.

the amount itself may not seem like a lot, but the tax savings accumulate over time. be careful, though, as you may have to pay back the deductions you've earned if you terminate.

a pre-year-end checklist

the key to year-end real estate tax savings is being prepared before the end of the year. make sure to check the following items

first, make sure the name on the lease matches yours. Second, make sure you've declared your move to your current residence. third, ask your lender if the loan qualifies for the deduction. fourth, make sure your savings account payments are reflected in the simplified tax return.

we see hundreds of thousands of dollars in missed refunds every year because of one small mistake.

frequently asked questions

Q1. Is it better to use the rent tax credit or cash receipts? A1. It depends on your gross salary and spending situation, but in general, the tax credit is often more beneficial because it directly reduces your taxes. You can only choose one or the other, so please do the math and decide.

Q2. Can I take both the rental loan and the savings account deduction at the same time? A2. Yes, you can. however, if the total of the two items exceeds KRW 4 million, the excess is not deductible.

Q3. Can I get the mortgage deduction even if I am not a homeowner? A3. The long-term mortgage interest repayment deduction applies to loans taken out when acquiring a home, so only homeowners are eligible. if you are not a homeowner, please utilize the rent tax credit or the rental mortgage deduction.

Q4. What happens if I moved this year and didn't report my move? A4. You can't get the rent credit until you've declared your move. be sure to complete your move before the end of the year.

wrapping up

year-end real estate tax savings is an area where you get what you pay for. if you're a renter, make sure you're taking advantage of the rent and mortgage deductions, and if you're a homeowner, make sure you're taking advantage of the mortgage interest deduction. do it once before the year is out, and you'll see the results in the numbers on your checkbook.

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