Capital Gains Tax Rules to Change: Long-Term Holding Deductions to Be Abolished with a Cap on Deduction Amounts

[Anchor]

Tax deduction benefits for simply holding a property for a long period are set to disappear. The long-term holding special deduction will be converted into a long-term residency income deduction, and a cap will also be placed on the deduction amount.

Reporter Hong Yeongjae explains further.

[Reporter]

Currently, when a single-home owner sells a house, they can receive a deduction of 4% per year for both the holding period and the residency period, up to a maximum of 80% of the capital gains.

Among these, the government plans to cut the holding deduction in half in 2028, abolish it starting in 2029, and provide an 8% deduction per year exclusively for the residency period, up to a maximum of 80%.

The 2% annual holding period deduction previously granted to multiple-home owners in non-regulated areas will also be abolished in 2029.

If a house purchased for 1.2 billion won is lived in for 2 years and held for 10 years before being sold for 3.2 billion won, the capital gains tax will increase from the current 236 million won to 405 million won in 2029.

Because there was no limit on the deduction amount, high-priced homes with surging market values received larger benefits, prompting the introduction of a cap.

Deductions will be limited to 2 billion won in 2028, and down to 1 billion won starting in 2029.

[Cho Man-hee, Director General for Tax Affairs at the Ministry of Finance and Economy: For individuals whose capital gains reach 5 billion or 10 billion won, they are structured to receive benefits of up to 8 billion won in deductions. As a result, there have been numerous criticisms regarding taxation equity, questioning whether this constitutes excessive benefits.]

Revisions aimed at easing the capital gains tax burden were also included.

For single-home owners with properties valued at 3 billion won or less who have actually resided in them for 10 years or more, the basic deduction will be expanded from 2.5 million won to 25 million won.

Temporary tax reductions have also been arranged for retired seniors who need to dispose of their homes.

If a single-home owner aged 65 or older sells a home in the Seoul metropolitan area and relocates to a non-metropolitan area, 50% of the capital gains tax up to a maximum of 500 million won will be exempted next year, followed by a 30% reduction up to a maximum of 300 million won in 2028.

[Koo Yun-cheol, Deputy Prime Minister and Minister of Finance and Economy: For retired seniors who face heavy burdens, if single-home owners sell their homes in the metropolitan area and move to regional areas, we will actually reduce taxes compared to current levels.]

To provide multiple-home owners with an opportunity to sell, heavy capital gains tax penalties—which have been applied since May 10—will also be temporarily eased until 2028.

(Video Editing: Kim Yun-sung, Design: Jang Sung-beom, Im Chan-hyeok)

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