The government is considering a plan to abolish the maximum 40% long-term holding special deduction for capital gains tax (long-term deduction) that had been applied to single-home owners simply for holding a home for 10 years or more, according to reports on the 28th.
It is said to be reviewing a plan to cap the long-term deduction for capital gains tax at up to 1 billion won even when a single-home owner sells a dwelling lived in for 10 years or more. The aim is to increase the tax burden on people who only hold a so-called "smart single dwelling" without living in it and on ultra-high-priced dwelling owners.
According to a compilation of ChosunBiz reporting on the day, the Ministry of Economy and Finance is reviewing including in the "2027 tax reform plan," to be announced next month, a revision plan for the long-term deduction for capital gains tax with these details.
The long-term deduction subtracts up to 80% from the tax base when levying capital gains tax on dwellings with capital gains exceeding 1.2 billion won, depending on the period of dwelling holding and residence. It is 40% for holding 10 years or more, and 40% for residing 10 years or more. Critics have said it is regressive because the deduction amount increases as the home price and capital gains grow.
A reduction of long-term deduction benefits for non-resident single-home owners and ultra-high-priced dwelling owners had been somewhat anticipated. Earlier, Kim Yong-beom, the presidential chief of staff for policy, said on CBS Radio on the 27th regarding real estate tax reforms that "we are considering ways to appropriately reflect in policy measures such as setting a cap on the long-term deduction for capital gains tax."
At the second national real estate town hall meeting chaired by Prime Minister Han Seong-sook the previous day, Kang Seong-hoon, a professor in the department of public policy at Hanyang University who delivered the presentation on taxation, said, "For non-resident dwellings, we can consider shifting the long-term deduction to a residence-centered system and normalizing the tax burden." He added, "Even for resident-type single dwellings, there is an option to set a cap on the long-term deduction for ultra-high-priced dwellings with large capital gains."
Previously, National Tax Service Commissioner Lim Gwang-hyeon raised the point that the long-term deduction benefits for ultra-high-priced dwelling owners were excessive. In a post on social media on the 26th, Lim said, "Of the top 100 cases that received the most long-term deductions in 2024, 99 were in Seoul and 87 were in Gangnam-gu and Seocho-gu," adding, "The average deduction amount was 4.1 billion won in Gangnam-gu and 3.3 billion won in Seocho-gu, and there was even a case where a single dwelling in Gangnam-gu was sold and more than 20 billion won was deducted." The nationwide average long-term deduction amount was around 200 million won.