Money drawn from a Korean reverse mortgage (the “housing pension”) accrues interest. A deduction takes that interest off other pension income: the reverse-mortgage interest deduction, up to 2 million won a year. The home’s standard value at sign-up must be 1.2 billion won or less, and it applies only on a claim. We read Article 51-4 of the Income Tax Act and Article 108-3 of its Enforcement Decree in the original.
1. What is deducted. The interest cost arising in the tax period on reverse-mortgage payments received is deducted from the pension income amount (Act, Article 51-4(1)).
2. Two limits. If the interest exceeds 2 million won, 2 million is deducted; any amount above the pension income amount is treated as nil.
3. Conditions and claim. Standard value of the home 1.2 billion won or less at sign-up, and it applies only when the resident claims it (Decree, Article 108-3(1); Act, Article 51-4(2)).
Who qualifies — the conditions
| Item | Text | Our reading |
|---|---|---|
| Person | A resident with pension income | There must be taxable pension income, such as the National Pension, to deduct from |
| Type of pension | Paid under a reverse-mortgage guarantee under the Korea Housing Finance Corporation Act, or a financial institution’s reverse mortgage under that Act | What is commonly called the housing pension |
| Home value | Standard value of the mortgaged home 1.2 billion won or less at sign-up (including a home in the spouse’s name) | Measured at sign-up; the text says nothing about later rises |
| Claim | Applies when the resident claims it | Not automatic |
The Decree says a pension meeting “all” the conditions. Item 2 was deleted in 2009, so two remain: the type of pension and the home value.
How much — 2 million won and the pension income amount
Where the interest to be deducted exceeds 2 million won, 2 million won is deducted, and where it exceeds the pension income amount, the excess is treated as nil. (Act, Article 51-4(1))
| Interest for the year | Pension income amount | Deduction (ours) |
|---|---|---|
| 1.5 million won | 5 million won | 1.5 million won |
| 3.5 million won | 5 million won | 2 million won (cap) |
| 3.5 million won | 1.2 million won | 1.2 million won (up to pension income) |
| 1.5 million won | 0 won | 0 won |
All figures in the table are our examples. As the last row shows, with no taxable pension income there is nothing to deduct from. Whichever limit is applied first, the result is the smaller of the two (our reading).
How to get it — Decree, Article 108-3
- Establishing the interest — it is the amount stated on the reverse-mortgage interest cost certificate issued by the paying financial company or the Korea Housing Finance Corporation ((2)).
- Filing — attach the certificate to the final tax base return and submit it to the head of the competent tax office ((3)).
We read attachment to the final return as meaning the May global income tax filing. How someone whose pension income is settled at year-end without a return would claim is not in this text, and we did not check it this time.
What the text does not say
- Whether the reverse-mortgage payments themselves are taxed — these two provisions do not say. They deduct the interest “from the pension income amount”.
- The interest rate and how interest is calculated — only that the certificate figure is used.
- Eligibility for the reverse mortgage itself — that sits in the Korea Housing Finance Corporation Act and is covered in housing pension basics.
Checklist
- ☐ Was the home’s standard value 1.2 billion won or less at sign-up?
- ☐ Is there taxable pension income (without it, nothing to deduct from)?
- ☐ Has the interest cost certificate been issued?
- ☐ Was it attached to the final return as a claim?
Questions that remain
Is this the same as the deduction for National Pension contributions?
No. The pension premium deduction takes contributions paid off global income (social insurance premium deductions); this one takes reverse-mortgage interest off pension income. The ordering rule for deductions exceeding global income (Article 51-3(3)) does, however, name this deduction as well.
How is a pension taxed when drawn?
Tax on drawing the National Pension, pension savings and the like is in tax on pension withdrawals.
Sources
- Income Tax Act [Act No. 21221, partially amended 23 December 2025] — original text (checked 5 October 2026). Article 51-4(1) (interest cost; 2 million won; excess over pension income), (2) (claim) and (3).
- Enforcement Decree of the Income Tax Act [Presidential Decree No. 36737, partially amended 30 September 2026] — original text (checked the same day). Article 108-3(1) (item 1, type of pension; item 3, standard value of 1.2 billion won or less), (2) (interest cost certificate) and (3) (attached to the final return).
- Our own examples. The 1.5, 3.5, 5 and 1.2 million won in the table and the resulting deductions are ours.
Where to check further
- The scheme — housing pension basics.
- Your own interest cost certificate — issued by the Korea Housing Finance Corporation or the financial company paying the pension.
Written on 5 October 2026. The provisions are as published by the Korea Law Information Center; the reading and examples are ours.
