Avoiding Acquisition Tax Penalties When Living with Multi-Homeowner Parents

When purchasing real estate, acquisition tax is one of the key financial considerations, especially if you're living with multi-homeowner parents.

When purchasing real estate, acquisition tax is one of the key financial considerations, especially if you're living with multi-homeowner parents. Acquisition tax is applied based on the household rather than the individual, meaning if the criteria for calculating the number of homes is misunderstood, you may end up paying significantly more in taxes than expected. This post will cover essential points to watch out for and ways to minimize acquisition tax when living with parents who own multiple homes.

If you're living with parents who own multiple homes and you plan to purchase your own property, the acquisition tax could be unexpectedly high. The reason lies in how the tax is applied: it is based on the 'household' rather than the individual. When you acquire a home, your parent's property count could be added to yours, meaning you could be considered a third-homeowner, resulting in a much higher acquisition tax rate of 8-12%.

So, how can you avoid such a situation? First, pay attention to your parents' age. If your parents are 65 years or older, the household can be split, and their property ownership will not count against you. This means the number of homes your parents own will not be factored into your acquisition tax. However, if your parents are under 65, and you do not separate households, the property counts will be combined, leading to a higher tax burden.

Purchasing a home with a presale contract (pre-construction purchase) requires special caution. If a child is living with their parents to save for the down payment, and their parents already own multiple homes, the child may be hit with acquisition tax for owning three homes once the new property is completed, even though they only own one home themselves.

To avoid this issue, one solution is for the child to move out and form a separate household within 60 days of purchasing the property. According to local tax laws, if a person changes their residence within 60 days of buying a home, they are considered a separate household, and their parents’ property won’t count toward the acquisition tax.

Additionally, the government has introduced a policy offering a 50% reduction in acquisition tax for homes under ₩300 million located in depopulated areas. Taking advantage of this can also help reduce your tax burden even if you're living with multi-homeowner parents. Many areas outside major cities qualify for this benefit, making it easier for homebuyers to find options that reduce acquisition tax.

Acquisition tax can vary significantly depending on the number of homes owned by your household, and this can be especially tricky if you're living with parents who own multiple properties. Paying close attention to factors such as your parents' age, household separation, and moving within 60 days after buying a property can help you minimize tax penalties. Furthermore, taking advantage of government tax relief programs can help ease the burden. Stay informed and make use of the available benefits to avoid unexpected tax bills.