Tax liability varies by number of homes owned and rental method, not total asset value

High earners can still opt for separate taxation if rental income stays below 20 million won

Jeonse deposits on small homes exempt from deemed rental income tax regardless of how many are held

Experts call for overhaul tied to actual rental income and ability to pay

A real estate agency in Songpa-gu, Seoul [Yonhap]
A real estate agency in Songpa-gu, Seoul [Yonhap]

A landlord who owns a single home with a standard assessed value of 1.2 billion won ($876,000) pays no income tax on monthly rent collected, while a landlord who owns two homes each assessed at 600 million won and rents both out on a monthly basis is subject to taxation. The total property value is identical, yet the number of homes owned determines the tax bill.

Critics say this arrangement raises serious questions about fairness in the tax system, since landlords holding the same total value of housing assets face different tax treatment depending solely on how many properties they own.

According to the National Assembly Research Service's "2026 National Audit Issue Analysis" released Friday, monthly rental income earned by a single-home owner is exempt from tax as long as the property's standard assessed value does not exceed 1.2 billion won. Once that threshold is crossed, or when a landlord owns two or more homes, monthly rental income becomes taxable. The benchmark used is the standard assessed value, not the market price or actual sale price.

As a result, a landlord who owns a single home assessed at 1.2 billion won owes no tax on monthly rent received, while one who owns two homes each assessed at 600 million won is taxed on that rental income. The actual amount owed varies depending on deductible expenses and other allowances, but the disparity begins at the threshold stage itself — before any deductions are applied — even though the total housing assets are the same.

The rental method also makes a significant difference. Renting out two homes assessed at 600 million won each on a monthly basis triggers taxation, but renting the same properties under a jeonse arrangement — where tenants pay a large lump-sum deposit instead of monthly rent — is not taxed. The deemed rental income on jeonse deposits represents the notional return a landlord could earn by investing the deposit.

Deemed rental income on jeonse deposits is in principle taxable only for landlords who own three or more homes. This year, jeonse rentals by owners of two high-value homes were partially brought into the taxable category, but two-home owners whose properties do not qualify as high-value continue to enjoy an exemption. The same property can therefore be taxed or not depending entirely on whether the landlord collects monthly rent or a jeonse deposit.

The jeonse deposit exemption also intersects with gap investment demand. Landlords can use a tenant's deposit to reduce the out-of-pocket capital needed to purchase a home, while simultaneously avoiding deemed rental income tax on that deposit. The research service said the tax system's differential treatment of monthly rent and jeonse warrants scrutiny even when the potential effects on the rental market are taken into account.

The option to apply separate taxation on housing rental income — available even to high earners — is another source of inequity. Housing rental income is in principle aggregated with other income and taxed at the progressive rate of 6 to 45 percent. However, landlords whose annual housing rental receipts do not exceed 20 million won may opt for separate taxation at a flat rate of 14 percent.

This means that even individuals with substantial employment or business income can choose the lower separate tax rate for their rental income, as long as rental receipts fall below the threshold. Commercial property rental income, by contrast, is always aggregated with other income for comprehensive taxation. The same category of rental income is thus taxed differently depending on whether the property rented out is residential or commercial.

National Tax Service statistics cited by the research service show that 463,374 people filed housing rental income returns in 2024, reporting total receipts of 9.09 trillion won. Of those filers, 253,728 — more than the 209,646 who filed under comprehensive taxation — chose the separate taxation option. Receipts reported under separate taxation totaled 2.32 trillion won.

The exemption for deemed rental income on jeonse deposits held against small homes also fails to account adequately for the overall scale of a landlord's holdings. Small homes with a residential floor area of 40 square meters or less and a standard assessed value of no more than 200 million won are excluded from deemed rental income taxation through the end of this year. The exemption applies regardless of how many such properties a landlord owns, meaning wealthy investors holding multiple units can still benefit. A property being individually small and inexpensive does not necessarily mean the landlord's total assets and rental income are modest.

To improve equity in housing rental income taxation, the research service said the criteria — which currently diverge based on the number of homes owned and the rental method — need to be restructured around actual rental income and ability to pay. It said the first step should be identifying how many landlords currently fall outside the taxable scope and what rental income they earn, then estimating how many additional taxpayers and how much additional revenue a reform would generate.

The National Assembly Research Service proposed reviewing an overhaul of the tax framework, saying "there is a need to restructure the taxation method based on the number of homes owned into one based on housing rental income levels." It added that "the increased tax burden on landlords from an expansion of taxation can be eased through tax credits for small-home rental businesses, while the rental cost burden on tenants can be relieved through monthly rent tax credits."


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