Media playback is not supported on this device
The Frenchman, 35, opted to extend his contract with the Royals in February until June 2018, having joined from Bournemouth in January 2016.
"It's a decision I took with my family, who I've been away from now for 13 years," he told BBC Radio Berkshire.
"We just think it's a good time for me to get back home and start a new life. I'm building a house in France."
Kermorgant, who also played for Leicester and Charlton, has scored 10 goals for Reading so far this season as they bid to secure a Championship play-off place.
He will hope to play a key role when Jaap Stam's side face fellow promotion contenders Leeds at home on Saturday.
"I think it will be a big game," Kermorgant said. "There's every chance we could meet again in May if we both stay in our current positions.
"It will be a good test for us to see where we can be. We want to finish as high as we can and we've been third in the league for a long time.
"If we can beat Leeds, that will take us to fourth and maybe we can push for more."
Reading striker Yann Kermorgant has confirmed he will retire at the end of the 2017-18 season.