Over 90% of Long-Term Holding Tax Deductions for High-Priced Homes Concentrated in Seoul

▲ A real estate agency in Gangnam-gu, Seoul, displays listings.

More than 90 percent of long-term holding special deductions for high-priced homes with actual transaction prices exceeding 1.2 billion won (based on last year's tax assessments) were found to be concentrated in Seoul.

In particular, 44 percent of these deductions were concentrated in homes sold for over 3 billion won, highlighting the regressive nature of the tax benefit.

According to the National Tax Service's National Tax Statistics Portal on Tuesday (June 30), the total amount of long-term holding special deductions based on capital gains tax assessments (revisions) last year reached 863.8 billion won nationwide.

This is an increase of 236.7 billion won from the previous year.

The figures were compiled based on high-priced homes with actual transaction prices exceeding 1.2 billion won at the time of sale.

Of this total, the amount of long-term holding special deductions applied to high-priced homes in Seoul was 782.3 billion won.

This means that 90.6 percent of all long-term holding special deductions for high-priced homes were concentrated in Seoul.

Gyeonggi Province followed with 53.9 billion won, while Busan (18.2 billion won) and Daegu (3.4 billion won) trailed behind.

Considering the number of sales in Seoul (2,709 cases), the average deduction per transaction is approximately 289 million won.

This is more than three times higher than in other metropolitan areas such as Incheon (61 million won) and Gyeonggi (85 million won).

The deductions were concentrated in the ultra-high-priced segment of the housing market.

Deductions for homes sold for more than 3 billion won amounted to 382.7 billion won, accounting for 44.3 percent of the total long-term holding special deductions for high-priced homes.

Deductions for the segment exceeding 5 billion won totaled 160.5 billion won, while the segment between 3 billion won and 5 billion won accounted for 222.2 billion won.

The 2 billion to 3 billion won segment accounted for 213.2 billion won, and the 1 billion to 2 billion won segment accounted for 219.4 billion won.

The long-term holding special deduction is a system designed to reduce the capital gains tax burden on properties held for a long period.

For single-home owners with properties exceeding 1.2 billion won in actual transaction price, the system provides a deduction of up to 40 percent each for the holding period and the residency period, for a combined maximum deduction of 80 percent.

For example, if a single-home owner sells a property they have held and lived in for 10 years or more, they receive a 40 percent deduction for the holding period and a 40 percent deduction for the residency period, resulting in a total deduction of up to 80 percent of the capital gains.

The government is considering a plan to significantly strengthen tax differentiation based on actual residency by reducing or abolishing the deduction for simple ownership while increasing the benefits for actual residency periods.

The review was prompted by criticism that the structure of the long-term holding special deduction, which provides greater benefits as capital gains increase, distorts the housing market.

In April, President Lee Jae-myung wrote on X (formerly Twitter), "Is it a 'tax bomb' to normalize the abnormality of giving tax cuts for holding onto a house for a long time without living in it? To properly protect the housing of single-home owners, it is right to reduce the deduction for non-resident holding periods and increase the deduction for residency periods by that much."

(Photo: Yonhap News)

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