Korea's housing subscription account deduction removes 40 percent of up to 3 million won of annual deposits from taxable income, capped at 1.2 million won. It does not hand back 1.2 million won in tax. Because the deduction shrinks taxable income rather than tax owed, someone in the 15 percent bracket sees their bill fall by 198,000 won once the 10 percent local income surtax is counted.
Paying in 250,000 won a month for twelve months lands exactly on 3 million won. But 250,000 won appears twice in the rules around these accounts, and the two figures come from different systems. One is the year-end tax deduction ceiling; the other is the monthly amount recognised toward priority in public housing draws.
A 1.2 million won deduction cuts how much tax exactly
An income deduction shrinks the taxable base. Tax falls by that base reduction multiplied by the applicable rate, and the 10 percent local income surtax falls alongside it. Here is what a full 1.2 million won deduction actually saves at each bracket.
| Taxable income band | Rate (%) | Income tax cut (KRW) | Local surtax cut (KRW) | Total tax cut (KRW) | vs 3M won deposited (%) |
|---|---|---|---|---|---|
| Up to 14M won | 6 | 72,000 | 7,200 | 79,200 | 2.64 |
| 14M–50M won | 15 | 180,000 | 18,000 | 198,000 | 6.60 |
| 50M–88M won | 24 | 288,000 | 28,800 | 316,800 | 10.56 |
The same 3 million won returns anywhere from 79,200 won to 316,800 won — a fourfold spread. Since eligibility caps out at 70 million won of gross salary, taxable income after other deductions generally lands inside the 24 percent band. It also means a young worker sitting in the 6 percent band gains relatively little from filling the account.
Measured against the deposit, the 15 percent case works out to 6.6 percent. With subscription account interest running at 2.3 to 3.1 percent, the deduction is worth more than the interest. But that 6.6 percent is a one-time return on that year's 3 million won, not a compounding annual yield.
A 1.2 million won deduction is income removed, not money returned. What actually lands in hand is decided by your own tax rate.
Two different 250,000 won figures
From November 2024 the monthly recognised deposit on subscription savings rose from 100,000 won to 250,000 won. As Newsis reported, holders had always been able to deposit between 20,000 and 500,000 won a month, but the recognised amount had been fixed at 100,000 won since 1983 — the change multiplied it by 2.5. Around the same time the interest rate on the accounts rose 0.3 percentage points, from a 2.0–2.8 percent range to 2.3–3.1 percent.
By coincidence the deduction ceiling is also 3 million won a year, or 250,000 won a month. The matching figures read like one rule, but they rest on different bases.
| Category | What the 250,000 won means | Where it applies | If you pay more |
|---|---|---|---|
| Monthly recognised deposit | Monthly cap counted toward public housing priority | National housing (gongong bunyang) draws | Up to 500,000 won accepted, only 250,000 recognised |
| Deduction ceiling | 3M won a year = 250,000 x 12 months | Year-end tax settlement | Anything above 3M won is not deductible |
Private-sector housing draws run on a required deposit balance rather than a payment count, so the recognised amount is irrelevant there. For a non-homeowning employee targeting private housing only, 250,000 won a month is paid to fill the deduction ceiling, not to improve draw odds. Conversely, someone earning above 70 million won who is chasing public housing is looking purely at the draw-side number. The same deposit, two different purposes.
The 70 million won threshold and the no-homeownership certificate
Article 87 of the Restriction of Special Taxation Act sets eligibility as a resident with employment income whose gross salary for the tax year is 70 million won or less, and who is the head — or the spouse of the head — of a household owning no home. Gross salary means annual pay less non-taxable income, and 70 million won is a threshold rather than a band: exceed it by a single won and the year's deduction goes to zero.
There is a procedural requirement too. The same article requires a no-homeownership certificate (mujutaek hwaginseo) to be filed with the bank holding the account by the end of February in the year following the tax year. Money sitting in the account does not attract the deduction automatically; the bank has to confirm non-ownership before the record reaches the tax office. One filing carries forward to later years, but a year missed is difficult to recover retroactively.
The programme's survival has also been settled. According to the Korea Economic Daily, the sunset clause that would have ended the deduction after 2028 has been deleted, leaving it in place indefinitely. Introduced in 2010 and given an expiry date in 2017, the measure is now open-ended again. Falling participation is the backdrop: subscription account holders numbered about 25.77 million at the end of last month, down roughly 410,000 from 26,184,107 at the end of last year.
Close it inside five years and 6% comes back out
Article 87 provides that where a holder who has claimed the deduction terminates the savings contract within five years of opening it, an amount equal to 6 percent of the cumulative deposits made after the deducted tax year — capped at 3 million won a year — is clawed back from the account balance. Winning a draw for a home above the national housing size limit also triggers the clawback. Death of the saver, emigration, and other grounds set by presidential decree are excluded.
Assuming the full 3 million won is paid in each year and all of it falls into the clawback base, the arithmetic by holding period looks like this. The tax-saving column simply accumulates the bracket figures from the earlier table.
| Holding period | Clawback base (KRW) | Clawback at 6% (KRW) | Cumulative tax saved (15% band, KRW) | Net (KRW) |
|---|---|---|---|---|
| Closed after 2 years | 6,000,000 | 360,000 | 396,000 | +36,000 |
| Closed after 3 years | 9,000,000 | 540,000 | 594,000 | +54,000 |
| Closed just before 5 years | 15,000,000 | 900,000 | 990,000 | +90,000 |
| Closed after 5 years | — | 0 | 990,000 | +990,000 |
Even in the 15 percent band, closing before the five-year mark shrinks three years of benefit down to 54,000 won. In the 6 percent band the result flips outright — three years of tax saving comes to 237,600 won against a 540,000 won clawback, a net loss of 302,400 won. Because the 6 percent rate is fixed and unrelated to your bracket, the lower your rate, the harder an early closure hits.
Two deductions aimed at the same non-homeowning employees work in opposite ways. The monthly rent credit subtracts directly from tax owed, so its value is fixed regardless of bracket, while the subscription account deduction shrinks income and lets the bracket decide the outcome.
What to check
- Confirm gross salary on last year's withholding receipt — 70 million won is a threshold, not a band, and crossing it wipes out that year's deduction.
- Confirm household head status on your resident registration. A household member does not qualify; the spouse of the household head does.
- Confirm the no-homeownership certificate has been filed with the bank. The deadline is the end of February in the following year, and without it deposits earn no deduction.
- Check your own bracket before deciding to fill the 3 million won. In the 6 percent band, the tax effect of a full year's deposits is 79,200 won.
- Check whether five years have passed since opening. Closing inside five years triggers a 6 percent clawback on cumulative deposits, as does winning a draw for an oversized home.
- If you are targeting public housing, separate the 250,000 won recognised deposit from the deduction ceiling — private housing draws run on deposit balance and ignore the recognised amount entirely.