When South Korea's comprehensive real estate tax overhaul takes full effect in 2028, couples who jointly own a home valued at up to 2.6 billion won ($1.84 million) will face a lighter tax burden than those who hold the property under a single name, according to a simulation by tax industry experts.
For more expensive properties, the outcome depends on whether the owner qualifies for age-based deductions (for those 60 or older) or residency-based deductions (for those who have lived in the home for at least five years).
Tax professionals ran simulations covering single-apartment owners with properties valued from 2.1 billion won to 40 billion won, in 100-million-won increments, under the 2028 comprehensive real estate tax rules. The results were released Monday.
Under the current system, couples with joint ownership of a single home each receive a basic deduction of 900 million won — 1.8 billion won combined — regardless of where the property is located or whether they live there. Under the revised rules, the basic deduction will shrink for non-residents, and the fair market value ratio will rise to 70 percent, or 80 percent in regulated zones, up from the current 60 percent.
Even so, couples without qualifying age or residency deductions are expected to pay less comprehensive real estate tax under joint ownership than single-home taxpayers, regardless of whether they live in the property or where it is located.
Joint ownership either provides a larger deduction or, even when it does not, allows the taxable base to be split between two people.
For couples who live in the home, each spouse receives a 900-million-won basic deduction — 1.8 billion won in total — which still exceeds the 1.4 billion won deduction available to a single-home taxpayer.
For non-residents, however, each spouse receives only a 400-million-won deduction, for a combined 800 million won, which falls below the 900-million-won deduction available to a non-resident single-home taxpayer.
If the property is in a regulated zone such as Seoul, the 80-percent fair market value ratio applies to joint owners, putting them at a disadvantage compared with single-home taxpayers, who are subject to the 70-percent rate.
Because the comprehensive real estate tax is assessed on an individual basis, joint-ownership couples split the taxable base between two people. This generally places each spouse in a lower tax bracket, resulting in a smaller overall tax burden than that of a single-home taxpayer.
For example, a couple who jointly own a Seoul apartment valued at 3.5 billion won and rent it out while living elsewhere would owe about 4.86 million won in comprehensive real estate tax — 2.18 million won less than the roughly 7.04 million won that would be owed if either spouse held the property alone as a single-home taxpayer.
If the couple lives in the apartment, the estimated tax would be about 1.12 million won under joint ownership and about 3.33 million won under sole ownership.
Take a hypothetical couple — call them Seong Chun-hyang and her husband — who jointly own a single apartment valued at 2.5 billion won. Under joint ownership, each spouse's assessed value falls below 900 million won, exempting them entirely from the comprehensive real estate tax.
Under sole ownership, however, the assessed value would exceed the tax-exempt threshold of 1.4 billion won. The estimated tax would be about 590,000 won if the owner lives in the property, or about 2.06 million won if they do not.
These figures compare tax burdens based on the calculated comprehensive real estate tax on the residential portion, after deducting property tax — excluding the urban area portion, local education tax and regional resource facility tax. Age and residency deductions were not applied. Joint ownership was assumed to be split equally between spouses, with total property tax assumed to be the same as for a single-home taxpayer.
Those who are 60 or older or have lived in the property for at least five years should factor in the applicable tax credits.
Starting in 2028, the current ownership deduction will be fully converted into a residency deduction ranging from 20 to 50 percent, while the age deduction will remain at 20 to 40 percent, as under the current rules.
The two deductions may be combined for a maximum of 80 percent, subject to a cap of 6 million won.
Because these deductions apply only to single-home taxpayers, couples filing under joint ownership are not eligible for age or residency deductions.
For homes valued at 2.6 billion won or less, joint ownership is advantageous regardless of deductions. For those who qualify for the full 80-percent deduction, sole ownership becomes more favorable than joint ownership for apartments in regulated zones valued between 2.8 billion won and 4.6 billion won.
If the couple in the earlier example registers as a single-home taxpayer and claims the 80-percent deduction, their comprehensive real estate tax would fall to about 670,000 won — roughly 450,000 won less than under joint ownership.
For non-residents of a regulated-zone apartment who qualify for a 40-percent age deduction, sole ownership is estimated to result in lower comprehensive real estate tax than joint ownership for properties valued between 2.7 billion won and 5.3 billion won, and again between 6 billion won and 6.6 billion won.
For properties valued at 6.7 billion won or more, joint ownership carries a lighter comprehensive real estate tax burden than sole ownership, regardless of ownership or residency deductions. Actual tax liability may vary depending on the property's market price, the assessed-value realization rate and whether the fair market value ratio special provision applies.
Couples who jointly own a single home may each file their comprehensive real estate tax separately, or they may apply for recognition as a single-home taxpayer under the special provision.
To be recognized as a single-home taxpayer, couples must apply at their local tax office between Sept. 16 and Sept. 30 each year. A single application is sufficient — unless circumstances change, the couple will continue to be treated as a single-home taxpayer in subsequent years.
oskymoon@heraldcorp.com
