Living for 2 Years and Holding for 10 Yields 2 Billion Won in Profit... What Changes for Capital Gains Tax in 3 Years?

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Tax deduction benefits for capital gains, which were previously granted simply for holding a property for a long time, are also disappearing. The long-term "holding" special deduction is being replaced by a long-term "residency" income deduction, and a cap is also set on the deduction amount.

Reporter Hong Yeongjae has the details.

[Reporter]

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

Among these, the government plans to cut the holding deduction in half by 2028 before abolishing it entirely starting in 2029, leaving only the residency period eligible for an 8% deduction per year, up to a maximum of 80%.

The 2% annual holding period deduction previously granted to multiple-homeowners in non-regulated areas will also be phased out in 2029.

For instance, if a house purchased for 1.2 billion won is sold for 3.2 billion won after living in it for 2 years and holding it for 10 years, 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 disproportionately larger benefits, prompting the introduction of a cap.

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

[Cho Man-hee, Head of the Tax Bureau at the Ministry of Finance and Economy: Even those with capital gains reaching 5 billion or 10 billion won were structured to receive tax benefits of up to 8 billion won. As a result, there were many criticisms regarding tax equity, questioning whether these were excessively generous benefits.]

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

For single-homeowners 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 elderly citizens who must dispose of their homes.

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

[Koo Yun-cheol, Deputy Prime Minister and Minister of Finance and Economy: For retired elderly citizens who face heavy burdens, we will actually reduce taxes further than before in cases where a single homeowner sells a property in the capital area and moves to a regional province.]

To give multiple-homeowners an opportunity to sell, the heavy capital gains tax surcharges applied since May 10 will also be temporarily eased through 2028.

(Video Editing: Kim Yoon-sung, Design: Jang Seong-beom, Lim Chan-hyuk)
※ Please note: This article was translated by AI and may contain errors.