year-end real estate taxes, are there any refunds you missed this year? whether you're an owner-occupier or a single-family homeowner, keep track of real estate deductions like the rent tax credit, rental property tax deduction, and mortgage interest deduction to make your paycheck in March a tax bomb instead of a tax bill.
as the end of the year approaches, there's one word that's on everyone's mind. "Year-end taxes." the year-end tax return is the difference between getting a paycheck in March or a tax bill in March. With the recent diversification of living arrangements and the increase in financial activities related to real estate, such as renting, leasing, purchasing, and lending, the importance of real estate tax savings is growing.
many people think, "I don't own a home yet, so this doesn't apply to me," or "my company will take care of it," but the reality is different. whether you don't own a home, own a home, or even own a savings account, there are taxes you can get back on your year-end tax return. if you don't know about them, you miss them, but if you do know about them, you can get a refund, which means you need to make sure you're taking advantage of these real estate-related deductions and credits to get the most out of your tax return.
let's take a look at some of the most important real estate tax savings you should know before tax season this year.
the rent credit: A must-have for homeowners
if you're a homeowner living in a rented apartment, you can get a portion of your rent back at tax time with the rent credit.
if you are a homeless household head with a gross salary of KRW 80 million or less, and your residence is 85 square meters or less or has a base value of KRW 400 million or less, you can receive a tax credit of 15% of your monthly rent payment for the year (17% for those earning KRW 55 million or less, capped at KRW 10 million per year).
however, the tenant's name on the lease must be yours and you must have registered your residency to receive the deduction. if you've moved or renewed your lease this year, be sure to check your contract and whether you've reported your move.
rental mortgage deduction: If you rent, you get to keep the interest on your loan
workers who live in rentals can also get a tax refund by deducting the principal payments on their rental mortgage. you can deduct 40% of the principal and interest you paid on your rental loan during the year, up to a maximum of $4 million per year.
to qualify for the deduction, you must be a homeowner, the loan must have been executed within three months of the move-in date, and the bank must have paid the loan directly to the landlord's account. (Internal loans or personal borrowing are excluded.)
if you're already using a sublease, make sure your repayments are properly registered with Tax Simplifier beforehand.
mortgage interest deduction: key to saving money as a single homeowner
if you're a single homeowner, don't forget the mortgage interest deduction on your tax return. you can deduct a percentage of the interest you pay on your mortgage, which can make a big difference in your tax burden in times of rising interest rates.
the deduction is only available if the entire household owns only one home, and the home must have a base market value of 600 million won or less (excluding office buildings). The amount of the deduction also depends on the repayment term and method of the loan: up to 15 million won per year for fixed-rate amortization loans for 15 years or more, and between 5 million and 10 million won for other conditions.
note: Switching loans or changing repayment terms can make you ineligible for the deduction or reduce the limit. don't just look at the interest rate, but also consider the tax benefits you're currently enjoying.
housing Credit: Savings accounts are also tax-free
if you are the head of a household without a home (with a gross salary of KRW 70 million or less), you can deduct 40% of your annual contributions, up to a maximum of KRW 3 million per year. the maximum deduction per year is about 1.2 million won, but the tax savings are significant if you pay consistently.
however, be aware that if you cancel early, you may have to pay back all the taxes you've deducted.
year-end real estate tax savings checklist
to take advantage of year-end real estate deductions, you need to be prepared before the end of the year. there are many things you can't fix retroactively once the year is over, no matter how frustrating, so use the checklist below to make sure you're prepared now.
lease and move-in report: to qualify for the rent credit, you need to be in the tenant's name and registered to move in. Check your lease and whether you've moved in.
check your loan payments: Make sure your sublet and mortgage payments are properly registered in the Tax Simplifier. double-check your deductions, including whether your sublease is paid directly to the landlord and how your mortgage is repaid.
proof of savings plan contributions: Get proof of contributions for this year's savings plan contributions to prepare your company filings. (Keep in mind that you may have to pay back any benefits you've accrued if you terminate your plan)
check for miscellaneous items: Do a final check for any real estate-related deductions you may have missed (e.g., deducting closing costs when buying a home)
related article: How to get a big tax refund
related article: Tax savings for professionals
Q. what deductions can I take on my tax return if I don't own a home?
A. If you are a homeless worker without a home, you can receive the following deductions: rent tax credit, principal repayment deduction for home rental borrowings (rental mortgage deduction), and comprehensive savings deduction for housing pledges.
Q. what are the requirements to qualify for the rent tax credit?
A. You must be a homeless household head with a gross salary of 80 million won or less, and your rented home must be 85 square meters or less or have a market value of 400 million won or less. the lease agreement must be in your name and the address must be registered to receive the deduction.
Q. how much can I deduct for mortgage interest payments?
A. The deduction depends on the terms of your loan. fixed-rate amortizing loans with 15 years or more can be deducted up to $15 million per year, while variable-rate or short-term loans are capped at $5 million to $10 million.
Q. what should I be aware of when claiming the deduction for housing subscription passbooks?
A. Only household heads without a home (with a gross salary of KRW 70 million or less) are eligible for the subscription passbook deduction, and it is important to be consistent as you will have to return all the deducted amount if you cancel the subscription.
Q. how can I get a large year-end tax refund?
A. The first step is to make sure you're aware of all the deductions that apply to you, especially those related to real estate, as they're easy to miss if you're not aware of them. Remember that any deductions that don't automatically appear on the tax simplifier will need to be claimed separately. After all, as the saying goes, you get what you pay for, so studying and preparing ahead of time is the best way to increase your paycheck in December.
whether you own a home or not, there are plenty of real estate tax savings you can get back on your tax return if you do your homework. After all, you only get what you know, so make sure you're on top of your taxes this year and get a bigger paycheck in March! If you enjoyed this article, let us know what you think in the comments, and don't forget to subscribe to our blog and sign up for our newsletter for more helpful tax tips.