Separate Taxation vs. Comprehensive Taxation for Rental Income Tax: How to Choose Around the KRW 20 Million Threshold and May Filing Guide 2026

Key Summary For housing rental income, if annual rental revenue is KRW 20 million or less, you can choose either separate taxation (flat 14% rate) or comprehensive taxation when filing every May. But if it exceeds the threshold by even KRW 1, it automatically switches to comprehensive taxation and is subject to progressive rates of 6% to 45%. By using registered rental business status, splitting ownership between spouses, and the 60% deemed expense deduction, you can reduce your tax burden by 30% to 50%. Missing the May 31 filing deadline by even one day results in a 20% non-filing penalty.

Key answer: If rental income is KRW 20 million or less, separate taxation can be selected; if it exceeds that amount, comprehensive taxation applies.

📑 Table of Contents

• How is rental income tax calculated?
• Separate taxation at 14% vs. comprehensive progressive taxation: which is better?

- Separate taxation at 14% (15.4% including local tax): simple fixed rate - Comprehensive taxation: progressive 6% to 45%

• Benefits for registered rental business operators: tax savings when registered for 4-year or 8-year rental
• Five practical tax-saving strategies (check before filing in May 2026)

- 1) Split ownership between spouses: each person gets a KRW 20 million threshold - 2) Deemed rent on deposits: applies from three homes onward - 3) Registered rental business operator: overwhelmingly favorable for long-term holders - 4) Proving actual necessary expenses: when costs exceed the deemed 50% expense amount - 5) Apply for installment payment of comprehensive income tax: two-month installment payment available if over KRW 10 million

• Step-by-step guide to filing comprehensive income tax in May (30-minute Hometax course)
• Frequently Asked Questions (FAQ)

- Q1. Do single-home owners also have to pay rental income tax? - Q2. Do I still pay rental income tax if I only receive a jeonse deposit? - Q3. Can I switch between separate taxation and comprehensive taxation every year? - Q4. Am I unable to rent out property if I do not register as a rental business operator? - Q5. Is officetel rental also subject to housing rental income tax? - Q6. If rental income is negative because of vacancies, can I receive a refund? - Q7. How is tax handled when a foreign resident rents out Korean real estate?

• Related Articles
• Closing: rental income tax starts at the purchase stage, not with a single filing

How is rental income tax calculated?

Rental income tax is a tax imposed on rent received from leasing residential or commercial real estate (monthly rent + deemed rent on deposits). For housing rentals, the taxation method changes completely based on whether total annual rental revenue is KRW 20 million. At KRW 20 million or less, you can choose each year between separate taxation at 14% (15.4% including local tax) and comprehensive taxation, whichever is more favorable. If you exceed KRW 20 million by even KRW 1, you are forced into comprehensive taxation, where the income is combined with other income and progressive tax rates apply.

→ You can check an accurate tax simulation in one second with the real estate tax calculator.

Separate taxation at 14% vs. comprehensive progressive taxation: which is better?

The choice is available only when annual rental revenue is KRW 20 million or less, and the key variable is the size of other income (wages, business income, interest, and dividends). Comprehensive taxation is favorable for full-time landlords with little earned income, while separate taxation is overwhelmingly favorable for high-income employees. In other words, even with the same rental revenue, the tax burden can differ by 3 to 10 times depending on the household income structure.

Separate taxation at 14% (15.4% including local tax): simple fixed rate

• Deduct deemed necessary expenses of 50% from rental revenue (60% for registered rental business operators)
• Additional basic deduction: KRW 4 million for registered operators, KRW 2 million for unregistered operators
• Tax base × flat 14% rate → not combined with other income
• Zero impact from progressive taxation → favorable for high-income earners

Comprehensive taxation: progressive 6% to 45%

• Rental income + wage, business, interest, and dividend income are all combined
• Progressive rates (6/15/24/35/38/40/42/45%) apply after comprehensive income deductions
• Taxes already paid are deducted from the final tax amount
• If non-rental income is low, the effective tax rate may be lower than separate taxation

→ The two methods are not compared automatically, so you must simulate them yourself and choose when filing in May.

Benefits for registered rental business operators: tax savings when registered for 4-year or 8-year rental

Rental business registration must be completed in both places, the tax office (income tax business registration) and the city/county/district office (rental housing registration), for the tax-saving benefits to be complete. Once registered, the deemed expense ratio for separate taxation increases from 50% to 60%, and the basic deduction doubles from KRW 2 million to KRW 4 million. Even through separate taxation alone, this can create an annual difference of KRW 300,000 to KRW 800,000.

💡 Practical tip: Benefits for registered rental business operators require demanding follow-up compliance, including the obligation to keep rent increases within 5% and the 8-year mandatory rental period. If you plan to sell within 2 to 3 years, it is better not to register. If you are a long-term holder and multi-home owner, registration is overwhelmingly favorable because it can also exclude you from the capital gains tax surcharge. Related article: Real Estate Capital Gains Tax Reduction Strategies: One-Household, One-Home Tax Exemption Conditions

Five practical tax-saving strategies (check before filing in May 2026)

1) Split ownership between spouses: each person gets a KRW 20 million threshold

If rental homes are concentrated under one spouse's name, that person reaches the KRW 20 million threshold quickly. Splitting ownership between spouses, either jointly at 50:50 or across separate properties, allows each person to apply a separate threshold, making it possible to keep separate taxation for up to KRW 40 million in combined household rental revenue. However, when changing ownership (gift), you must simulate the 10-year cumulative KRW 600 million spouse gift deduction in advance to avoid a large gift tax bill.

2) Deemed rent on deposits: applies from three homes onward

For owners of three or more homes, an amount calculated by applying the time deposit interest rate (about 2.9% as of 2026) to the portion of total deposits exceeding KRW 300 million is added to rental revenue. In other words, even gap investors who bought with jeonse deposits can be treated as having rental revenue, so right before the May filing you must calculate and add deemed rent = (total deposits − KRW 300 million) × 2.9% × 60% × 90% yourself.

3) Registered rental business operator: overwhelmingly favorable for long-term holders

With 8-year rental registration (quasi-public rental), you can get triple tax savings: up to a 70% long-term holding special deduction for capital gains tax, exclusion from comprehensive real estate tax aggregation, and a 60% deemed expense deduction under separate taxation. If you can meet the obligation to keep rent increases within 5% and satisfy the 8-year mandatory rental period, registration is clearly advantageous. However, if you fail to complete the mandatory rental period, previously saved tax can be clawed back, so you must be able to comply through the end.

4) Proving actual necessary expenses: when costs exceed the deemed 50% expense amount

If actual spending such as repair costs, vacancy-related costs, brokerage fees, property tax, and rental deposit guarantee insurance premiums exceeds 50% of rental revenue (60% for registered operators), reporting actual necessary expenses instead of deemed expenses is more favorable. However, you are required to keep receipts, tax invoices, and contracts for five years, and if you do not organize documents throughout each rental stage, it is difficult to prove everything at once in May.

5) Apply for installment payment of comprehensive income tax: two-month installment payment available if over KRW 10 million

Regardless of whether you choose separate or comprehensive taxation, if the calculated tax exceeds KRW 10 million, you can apply to pay half by May 31 and the remainder by July 31. This is an essential option for multi-home owners with tight cash flow, and all you need to do is check the installment payment box when preparing the return. Related tool: take-home pay calculator

Step-by-step guide to filing comprehensive income tax in May (30-minute Hometax course)

1. 1Prepare documents: rental payment deposit history by tenant (bankbook copies), deposit contracts, receipts for repair costs and brokerage fees, and an annual rental revenue summary
2. 2Calculate deemed rent: if you own three or more homes, pre-calculate (total deposits − KRW 300 million) × 2.9% × 90%
3. 3Prepare the Hometax return: regular comprehensive income tax filing → enter housing rental income items → choose separate/comprehensive taxation → automatic tax calculation
4. 4Check the tax amount and decide on installment payment: if calculated tax exceeds KRW 10 million, check the installment payment application box
5. 5Pay: choose card payment (0.8% fee), bank transfer, or virtual account, and complete payment by midnight on May 31
6. 6File local income tax separately: additional local income tax filing is required through Wetax by June 30 (10% of income tax)

⚠️ Caution: If you miss the May 31 filing deadline by even one day, a 20% non-filing penalty plus a late-payment penalty of 0.022% per day will be imposed. If KRW 50 million in rental revenue is not reported, approximately KRW 3.5 million in penalties may be added, so make sure to finish by midnight on the 31st.

Frequently Asked Questions (FAQ)

Q1. Do single-home owners also have to pay rental income tax?

A: Rental income from one home with an officially assessed value of KRW 1.2 billion or less is tax-exempt. However, if you rent out one home with an officially assessed value exceeding KRW 1.2 billion (a high-value home) or a home located overseas, you are subject to tax even as a single-home owner.

Q2. Do I still pay rental income tax if I only receive a jeonse deposit?

A: Owners of two or fewer homes are not taxed on jeonse deposits. However, if you own three or more homes, deemed rent is imposed on the portion of total deposits exceeding KRW 300 million and is included in rental revenue.

Q3. Can I switch between separate taxation and comprehensive taxation every year?

A: Yes. When filing every May, you can automatically compare the two and choose the more favorable option

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Reference: Ministry of Land, Infrastructure and Transport Real Estate Statistics