National Tax Service Commissioner Lim Gwang-hyeon, ahead of the government's announcement of a real estate tax overhaul plan, pointed out the regressive nature of the long-term holding special deduction (Jang-teuk gongje) for one household with one dwelling.
Administrator Lim wrote on X (formerly Twitter) on the 26th, "The current long-term holding special deduction is excessively regressive because if you hold and live for 10 years, it deducts up to 80% of the taxable capital gains without a cap," adding, "The more expensive the dwellings are, and thus the bigger the gains, the more deductions you get."
The long-term holding special deduction is designed to reduce capital gains tax burdens on properties held for a long time, granting benefits to one household with one dwelling valued at more than 1.2 billion won in actual transaction price, with up to 40% each based on holding period and residence period, for a combined maximum of 80%.
Administrator Lim disclosed capital gains tax filing statistics for dwellings transferred in 2024 and pointed out the system's regional concentration. He said, "Among 24,816 one-household, one-dwelling cases nationwide, 5.03 trillion won in long-term holding special deductions were claimed, of which Seoul accounted for 4.5 trillion won, meaning 90% of the benefits were concentrated in Seoul." He continued, "Of Seoul's 4.5 trillion won in long-term holding special deductions, the three Gangnam districts and Yongsan District account for 3.5 trillion won, or 78.6%, while Dobong, Geumcheon, Jungnang, Nowon, Dongdaemun, Gwanak, Eunpyeong, and Guro districts are receiving almost no such benefits."
According to the deduction table he posted, 99 of the top 100 long-term holding special deduction amounts were for Seoul dwellings, and 87 of those were concentrated in Gangnam District and Seocho District. Dwellings in Gangnam District received an average of 4.1 billion won in deductions, and those in Seocho District received an average of 3.3 billion won. Administrator Lim said, "There is even a case where someone transferred a single dwelling in Gangnam District and deducted more than 20 billion won through the long-term holding special deduction," calling it "the ultimate in regressivity."
He said, "Progressivity—where those with higher income bear more taxes—is the basic principle (of taxes)," adding, "Gains from rising real estate prices are enjoyed more by high-priced dwelling owners, yet the long-term holding special deduction is producing regressivity that guarantees such unearned income as is."
He went on, "The system encourages 'one smart home,'" noting, "It has been 17 years since the one-household, one-dwelling long-term holding special deduction rate was raised without limit to a maximum of 80% in 2009." He added, "It is best for the tax code to maintain as much consistency as possible, but if unintended side effects emerge after the tax law changes, fine-tuning is an obligation the government must of course carry out," and asked, "Tax benefits need to be fairly normalized; even if we protect long-term holding special deductions for the middle class, what do you think about granting them without limit to ultra high-priced dwellings like this?"