Property tax changes complicate home ownership choices for couples

A notice offering to calculate apartment property taxes is posted at a real estate agency in Seocho District, Seoul, Tuesday. Yonhap

A salaried worker in his 40s surnamed Lee who lives in Seoul’s Dongjak District was caught off guard after learning that the government’s latest tax overhaul could increase the comprehensive real estate tax burden on couples who jointly own a single home.

Under the tax reform plan announced on Aug. 3, some provisions of the comprehensive real estate tax would apply the same standards to couples who jointly own a single home as to multiple-home owners, potentially increasing their tax burden.

“Wasn’t joint ownership between spouses encouraged by the government as a way to save on taxes?” Lee said. “I feel like I’ve been blindsided now that we’re suddenly being treated like multiple-home owners and facing tax disadvantages.”

More than 4,000 comments have already been submitted to the Ministry of Government Legislation’s public legislative participation center since the proposed revisions to the tax law were posted for public comment on Aug. 4. Many of the comments raise concerns about how couples who jointly own a single home would be taxed.

“It is wrong to treat couples the same as multiple-home owners based solely on the number of owners,” one commenter argued. “Penalizing married couples for jointly owning property is inconsistent with the government’s efforts to address the country’s declining birthrate and encourage marriage.”

Because the comprehensive real estate tax is assessed separately on each individual, couples who jointly own a home can each benefit from the basic deduction. Under the current system, a 50-50 ownership split allows each spouse to claim a 900 million won ($636,000) deduction, giving the couple a combined deduction of 1.8 billion won — more than the 1.2 billion won available to a single-home owner. This has made joint ownership a widely used tax-saving strategy among married couples.

Under the tax reform plan proposed by the Ministry of Finance and Economy, homeowners with a single property held in their own name would see their basic deduction increase to 1.4 billion won from 1.2 billion won. For other homeowners, however, the current 900 million won deduction would be replaced by a new formula based on the share of the value of their owner-occupied home in the total value of the properties they own.

The new rules would also apply to married couples who jointly own a single home. If they live in the property, each spouse could still claim a 900 million won deduction. But if the home is leased out, the deduction for each would drop to 400 million won because the value of an owner-occupied home would account for zero percent of the total value of the properties they own. This would bring the couple’s combined deduction down to 800 million won from 1.8 billion won.

Couples who actually live in their jointly owned home could also see their tax bills rise. The government plans to change the rate used to determine how much of a property’s assessed value is included in the taxable base, replacing the current 60 percent rate with a two-tier system of 70 percent and 80 percent starting in 2028.

For homes in Seoul and other designated areas, the lower 70 percent rate would be reserved for single-title homeowners, while married couples who jointly own a single home would be subject to the 80 percent rate, the same level applied to multiple-home owners.

President Lee Jae Myung attends a public debate on housing policy at the KBS annex in Yeouido, Seoul, July 23. Yonhap

The backlash has been fueled in part by the fact that President Lee Jae Myung had also jointly owned an apartment in Seongnam, Gyeonggi Province, with his wife before selling it recently. The arrangement had allowed the couple to reduce their property holding and capital gains tax liabilities.

With criticism mounting, Finance Minister Koo Yun-cheol sought to ease concerns in a Facebook post, stressing that taxpayers can choose the tax treatment that best suits their circumstances.

“Opting for the special tax treatment available to single-home households could prove more advantageous because it comes with additional tax credits,” Koo wrote.

The bigger concern, however, is that the rules themselves are becoming more complicated, forcing taxpayers to weigh multiple scenarios and tax implications to determine the most advantageous approach.

The growing complexity has prompted speculation that the government could revise the rules governing jointly owned homes as the bill moves through parliament.

At a Cabinet meeting Tuesday, the president called for policies to reflect people’s circumstances, saying, “Policies should follow the circumstances people face, rather than making the mistake of forcing people’s lives to fit into existing systems.”