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 between joint and sole ownership.

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 for properties valued at 1.8 billion won (approximately $1.3 million) or less, particularly in terms of basic deductions and tax base distribution. Starting in 2028, if a couple resides together, joint ownership under general taxation will be beneficial. Each spouse can claim a basic deduction of 9 billion won, totaling 18 billion won. While the basic deduction for sole ownership is set to increase from 12 billion won to 14 billion won, joint ownership still offers an additional 4 billion won in deductions.

For non-resident joint owners, it is essential to compare the expected tax liabilities under general taxation and the one-homeowner method. According to the current government tax reform plan, the basic deduction for non-resident joint owners under general taxation will decrease from 18 billion won to a total of 8 billion won, with 4 billion won per owner. In designated areas like Seoul, a fair market value ratio of 80% will apply. Although the one-homeowner method offers a basic deduction of 9 billion won with a fair market value ratio of 70%, the final tax burden under general taxation may be lower if age deductions are not applied.

When the property value exceeds 1.8 billion won, age and residency duration must be considered. Starting in 2028, the existing long-term holding tax deduction will transition to a deduction based on actual residency duration, applying rates between 20% and 50%. Combined with age deductions of 20% to 40%, taxpayers could receive up to 80% in tax deductions, although 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 residency deductions, making it necessary to compare the tax burdens for older individuals or those planning to reside long-term.

For example, a couple living in a 3.5 billion won apartment in a designated area would face an estimated comprehensive real estate tax of about 1.12 million won under joint ownership general taxation. In contrast, a sole owner without age or residency deductions would incur approximately 3.33 million won, but if they are over 60 and have lived there for more than five years, they could reduce their tax burden to about 670,000 won, which is roughly 450,000 won less than the joint ownership tax.

Ultimately, determining the best tax strategy for comprehensive real estate tax after 2028 will not be straightforward. If significant age and residency deductions are difficult to obtain, the benefits of joint ownership's 18 billion won basic deduction and tax base distribution must be weighed against the tax burden of the one-homeowner method for older individuals or those planning long-term residency. However, key issues such as the fair market value ratio and the deduction limits for non-resident homeowners remain unresolved, necessitating further government discussions.