Changes to Real Estate Taxation: Which is Better, Sole or Joint Ownership?

Couples preparing for marriage or looking to upgrade to a more expensive home often face the decision of ownership type. Until now, joint ownership has been recognized as a primary tax-saving strategy. However, recent government proposals to reform real estate taxation have complicated the calculations regarding whether joint or sole ownership is more beneficial.

According to industry sources on August 27, the government and ruling party are currently revising the real estate tax reform plan introduced earlier this month. It is expected that the tax criteria for non-resident homeowners and long-term holding tax deductions will be relaxed compared to the original proposal. Although the final plan has yet to be released, there is significant interest in which ownership type—joint or sole—provides greater tax benefits.

Based on the government's original proposal, joint ownership is advantageous in terms of basic deductions and tax base distribution for properties valued at 18 million won (approximately $26 million) or less. Starting in 2028, if a couple resides in the property, joint ownership under general taxation will be more favorable. When a couple holds one home in joint ownership and is taxed under general taxation, they can each receive a basic deduction of 9 million won, totaling 18 million won. Although the basic deduction for sole ownership under the one-home rule will increase from 12 million won to 14 million won, joint ownership still offers a deduction that is 4 million won higher.

For non-resident joint owners, it is essential to compare the expected tax liabilities under general taxation and the one-home rule. According to the current government tax reform plan, the basic deduction for non-resident joint owners under general taxation will decrease from 18 million won to a total of 8 million won, with each owner receiving 4 million won. In designated adjustment areas like Seoul, a fair market value ratio of 80% will also apply. While the one-home rule for non-residents appears advantageous with a basic deduction of 9 million won and a fair market value ratio of 70%, if age deductions are not applied, the final tax burden under general taxation may actually be lower.

When the assessed value exceeds 18 million won, factors such as age and length of residence must be considered. Starting in 2028, the existing long-term holding tax deduction will transition to a deduction based on actual residence duration, applying rates of 20% to 50%, combined with age deductions of 20% to 40%, allowing for a maximum tax deduction of up to 80%. However, a new limit of 6 million won will be imposed on the deduction amount. Joint ownership under general taxation will not benefit from these age and residence deductions, so if an owner is elderly or has lived in the same home for a long time, it is necessary to compare the tax burdens with the one-home rule.

For example, if a couple resides in a property valued at 35 million won in a designated adjustment area, the estimated comprehensive real estate tax under joint ownership and general taxation would be about 1.12 million won. In contrast, a sole owner under the one-home rule, without applying age and residence deductions, would face a tax of approximately 3.33 million won. However, if the sole owner is over 60 and has lived there for more than five years, receiving the maximum 80% deduction, their tax burden could drop to about 670,000 won, which is approximately 450,000 won less than under joint ownership.

Ultimately, determining the best tax strategy for comprehensive real estate tax after 2028 will not be straightforward, as it cannot be judged solely on whether to choose joint or sole ownership. If significant age and residence deductions are difficult to obtain, one must weigh the benefits of joint ownership's 18 million won basic deduction and tax base distribution against the tax burden of the one-home rule for those who are elderly or plan to reside long-term. However, key issues such as the fair market value ratio and the deduction limits for non-resident homeowners remain unresolved, necessitating further government discussions.