Korean Jeonse Loan Deduction Calculator

If you borrowed to fund a jeonse or monthly-rent deposit, part of what you repay on that loan is deducted from your earned income. This is the housing rental loan repayment deduction, and among the year-end settlement items it is the one that speaks most directly to tenants. Enter the principal and interest you repaid during the year and the calculator shows how much comes off your income and how much tax that actually saves.

It is an income deduction, not a tax credit, and the difference matters. The deducted amount is not money back; it is a reduction in the income on which tax is charged. Your real saving is the deduction times your marginal rate, which is why the calculator asks for your rate.

Employees who head a household with no home of its own and are repaying a jeonse or deposit loan, before the year-end settlement. Knowing the figure before handing documents to payroll lets you combine it with other items and estimate the refund. A household member other than the head can also qualify where the head claims no housing-related deductions.

Anyone also paying into a housing subscription savings account should run it. The two deductions share one ceiling, so claiming the savings deduction first leaves less room for this one. When deciding whether to repay more of the loan or put more into savings, this shows which one still has room under the ceiling.

The basis is 소득세법 제52조제4항. Where an employee heading a household without a home borrows from a financial institution to rent a home within the prescribed size, including a residential officetel, 40% of the principal and interest repaid is deducted from earned income. The same paragraph caps this deduction together with the housing subscription savings deduction at ₩4 million a year.

There are three steps. First, add up the principal and interest repaid during the year and take 40% of it. Second, subtract whatever the savings deduction has already used from the ₩4 million ceiling to find the room left. Third, the smaller of the two is the deduction. Multiply by your income tax rate to get the saving. Filling the ceiling takes ₩10 million of repayments in a year, so anyone repaying less than that simply gets 40% of what they repaid.

Say you repaid ₩6 million in a year, have no savings deduction and sit in the 15% income tax band. 40% of ₩6 million is ₩2.4 million, below the ₩4 million of room available, so ₩2.4 million is deducted in full. At 15% that is ₩360,000 less tax. There is ₩1.6 million of room left, so repayments of up to ₩10 million would still be fully deductible.

Now say you repaid ₩12 million and had already claimed ₩1 million through the savings deduction. 40% of ₩12 million is ₩4.8 million, but the room left is ₩4 million minus ₩1 million, or ₩3 million. The deduction is therefore ₩3 million and ₩1.8 million is lost to the ceiling. The saving is 15% of ₩3 million, ₩450,000. Repaying twice as much did not save twice as much, and the ceiling is the reason.

The most common is entering only the interest. Unlike the mortgage interest deduction, this one is based on principal and interest combined, so leaving out the principal understates it. The second is counting the savings deduction separately. The two share the ₩4 million ceiling, so computing each on its own and adding them overstates the result.

The third is mistaking the deduction for a refund. An income deduction lowers income, so the saving is the deduction times your rate, and the lower your rate the less the same deduction returns. Finally, this calculator does not test the detailed conditions, such as the timing of the loan or the size of the home. Requirements like the loan being drawn close to the move-in date on the lease should be checked against the National Tax Service guidance.