Capital Gains Tax Reform to Abolish 'Holding' Deduction and Focus Solely on 'Residency' with Up to 80% Cap

[Anchor]

Even if you own a house for a long time, you will no longer receive capital gains tax deductions upon sale unless you actually live in it. The long-term holding deduction is being replaced by a long-term residency deduction, and a cap will also be placed on the deduction amount, which previously had no limit.

Reporter Hong Yeongjae.

[Reporter]

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

Among these, the government plans to cut the holding period deduction in half by 2028 and abolish it entirely starting in 2029, while applying an 8% annual deduction—up to a maximum of 80%—solely for the residency period.

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

For example, if someone purchases a house for 1.2 billion won, lives in it for 2 years, holds it for 10 years, and then sells it for 3.2 billion won, their 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, owners of high-priced homes with sharp price increases enjoyed greater benefits, prompting the introduction of a cap.

Deductions will be capped at 2 billion won in 2028, and 10 billion won starting in 2029.

[Cho Man-hee, Director General for Tax Policy at the Ministry of Finance and Economy: People 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 pointing out that this was an excessive benefit and undermined tax equity.]

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

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

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

If a single-home owner aged 65 or older sells a house in the capital area and relocates to a non-capital region, they will receive a 50% reduction in capital gains tax, up to a maximum of 500 million won next year, and 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 and those facing heavy burdens, we are actually cutting taxes further than before in cases where single-home owners sell properties in the capital area and move to regional areas.]

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

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