If gross housing rental receipts are 20 million won or less for the year, a landlord in Korea may choose between separate taxation at a flat 14% and ordinary aggregate taxation. And on identical rent, the tax swings by several multiples depending on whether the property is registered as a rental business and whether the basic deduction is available. On 12 million won of annual rent, the final tax ranges from 112,000 won to 840,000 won.
Only three items create that spread: the deemed expense rate (60% or 50%), the basic deduction (4 million or 2 million won), and whether you qualify for that deduction at all.
Is your rental income taxable? Start with the property count
Under National Tax Service guidance, taxability turns on the number of homes owned, counted jointly by spouses. Rental income from a single home with a government-assessed value of 1.2 billion won or less need not be reported, but a single home above that assessed value generating monthly rent is taxable. With two homes, only monthly rent is taxed and deemed rent on deposits is not. From three homes up, deposits enter the tax base as well.
One rule changes from the 2026 tax year. For an owner of two homes each assessed above 1.2 billion won, deposits totaling more than 1.2 billion won will be pulled into the deemed rent calculation. For high-value two-home owners who assumed jeonse (lump-sum deposit lease) kept them outside the system, the threshold question itself changes.
Some homes drop out of the count. Small housing — a unit of 40 square meters or less in exclusive residential area with an assessed value of 200 million won or less for the tax period — is excluded from the property count for deemed rent through December 31, 2026. Both conditions, area and assessed value, must be met.
The separate taxation formula is only three items
The NTS structure is simple. The tax base is receipts minus deemed expenses minus the basic deduction; multiply by 14% and subtract any reduction to reach the final tax. Registered rental housing gets a 60% deemed expense rate and a 4 million won basic deduction; unregistered gets 50% and 2 million won.
Registration here is not a single form. The same guidance requires three conditions together: registration as a rental business operator under the Special Act on Private Rental Housing, business registration under Article 168 of the Income Tax Act, and a rent increase rate not exceeding 5%. Miss any one and the unregistered figures apply. That 5% ceiling follows the same arithmetic as the 5% cap under the lease renewal right.
What splits the tax bill is not the size of the rent, but whether the lease is registered and how much other income there is.
Same rent, different registration, different tax
The table below applies the formula directly, assuming rent only and no deposit, no reductions claimed, and local income tax of 10% excluded.
| Annual receipts (10k won) | Registered, deduction applies (KRW) | Registered, no deduction (KRW) | Unregistered, deduction applies (KRW) | Unregistered, no deduction (KRW) |
|---|---|---|---|---|
| 600 | 0 | 336,000 | 140,000 | 420,000 |
| 1,200 | 112,000 | 672,000 | 560,000 | 840,000 |
| 2,000 | 560,000 | 1,120,000 | 1,120,000 | 1,400,000 |
At 12 million won of receipts, the spread from best to worst is 7.5 times. The arithmetic: registered with the deduction subtracts 7.2 million won of deemed expenses and 4 million won of deduction, leaving a base of 800,000 won and a tax of 112,000 won. Unregistered without the deduction subtracts only 6 million won of expenses, leaving a base of 6 million won and a tax of 840,000 won.
On the 6 million won row, deemed expenses of 3.6 million plus the 4 million deduction exceed receipts, so the base falls to zero. On the 20 million won row, registered-without-deduction and unregistered-with-deduction land on the same 1,120,000 won — the point where the advantage of registering is entirely offset by one lost deduction.
When the 4 million won deduction disappears
The deduction carries a condition. NTS guidance states that it applies only when aggregate income for the tax period, excluding separately taxed rental income, is 20 million won or less. If employment or business income crosses that line, the entire 4 million won (or 2 million if unregistered) is gone — the no deduction columns above.
Note that aggregate income is not gross salary. Employment income is measured after the standard employment income deduction, so a gross salary slightly above 20 million won does not automatically wipe out the deduction.
Reductions remain available too. For small-housing rental operators, the reduction is 30% for four-year short-term rentals (20% for two or more units) and 75% for ten-year long-term rentals (50% for two or more). Applying the 75% long-term reduction to the 112,000 won case above brings the final tax down to 28,000 won.
Where a deposit alone creates a tax bill
A deposit is not income, but under certain conditions it is deemed to be. The NTS formula is (deposits minus 300 million won), accumulated daily, times 60%, divided by 365, times the time deposit interest rate of 3.1%, applied when three or more non-small homes are held and deposits total more than 300 million won.
Take a three-home owner with 800 million won of deposits leased for a full year. (800 million minus 300 million) times 60% times 3.1% equals 9.3 million won. That 9.3 million becomes gross receipts, and the separate taxation formula applies on top. Unregistered, subtracting 4.65 million of deemed expenses and the 2 million deduction leaves a base of 2.65 million won and a tax of 371,000 won. Registered, deemed expenses of 5.58 million plus the 4 million deduction exceed receipts, so the base is zero.
| Total deposits (100M won) | Deemed rent (10k won) | Unregistered tax (KRW) | Registered tax (KRW) |
|---|---|---|---|
| 4 | 186 | 0 | 0 |
| 6 | 558 | 52,600 | 0 |
| 8 | 930 | 371,000 | 0 |
| 12 | 1,674 | 891,800 | 231,400 |
On the 600 million won row, 5.58 million of deemed rent less 2.79 million of expenses and the 2 million deduction leaves a base of 790,000 won and a tax of 52,600 won. On the 1.2 billion row, even registered housing keeps a base of 2,696,000 won and pays 231,400 won. In short, jeonse alone with no monthly rent can still put you inside the filing net, depending on property count and deposit size.
What to check
- Property count, spouses combined — this is the starting point for taxability. The small housing exclusion (40 square meters or less, assessed value 200 million or less) runs only through December 31, 2026.
- Whether you hold two high-value homes — two homes each assessed above 1.2 billion won with deposits totaling more than 1.2 billion won enter the deemed rent base from the 2026 tax year.
- All three registration conditions — local government rental business registration, tax office business registration, and rent increases within 5%. Missing one drops you to 50% expenses and a 2 million deduction.
- The 20 million won aggregate income line — cross it and the basic deduction vanishes. That is the band where the tax in the table jumps up to sixfold.
- Compare separate against aggregate taxation — in a year with little other income, aggregate taxation can produce a lower rate. NTS worked examples show a case at 16.74 million won of receipts where aggregate taxation came out lower.
- Lease filing history — confirm your actual contract terms against the lease reporting threshold of a 60 million won deposit or 300,000 won monthly rent.