As backlash continues over the government's released "2026 tax reform plan," follow-up legislation to reduce the tax burden on single-home households is piling up in the National Assembly. Proposals include deducting property tax and comprehensive real estate tax paid during the holding period from capital gains, or raising the tax-free threshold for the sale of a single home from the current 1.2 billion won to 1.5 billion won.
According to the National Assembly's bill information system on the 16th, there were seven amendments to the Income Tax Act introduced between the government's released tax reform plan on the 3rd and the 14th. Among them were bills revising real estate and housing taxation, including capital gains tax for single-home owners and income deductions for jeonse loans. During the same period, no amendments to the comprehensive real estate tax law were introduced.
People Power Party lawmaker Kim Eun-hye on the 5th introduced an amendment to the Income Tax Act that would recognize property tax and comprehensive real estate tax paid during the holding period as necessary expenses when a single-home household sells a house. If necessary expenses increase, taxable capital gains decrease, reducing the capital gains tax burden.
Currently, when calculating capital gains on a home sale, directly incurred costs such as acquisition tax and brokerage fees, and capital expenditures such as balcony, bathroom, and kitchen expansions and window replacements, are recognized as necessary expenses. However, property tax and comprehensive real estate tax paid during the holding period are not included as necessary expenses.
Kim said, "With the government's overhaul of the long-term holding special deduction, the capital gains tax burden on single-home households that have held a home for a long time could increase," adding, "We need to ease the tax burden by deducting the holding taxes faithfully paid during the holding period from capital gains."
The government plan shifts the long-term holding special deduction for capital gains tax to focus on the period of residence. In 2027, the current system will be maintained, but in 2028 the holding-period deduction rate for single-home households will be lowered from 4% to 2% per year, while the residence-period deduction rate will be raised from 4% to 6% per year. From 2029, the holding-period deduction will be eliminated and only 8% per year will apply to the period of residence. The cap on capital gains eligible for the deduction will also be reduced to 2 billion won in 2028 and 1 billion won from 2029.
Academia has also raised the argument that holding taxes should be recognized as necessary expenses when calculating capital gains. Noh Hee-cheon, a professor at Soongsil University, said at a Seoul real estate forum on the 6th, "Since holding taxes are paid while owning a home and then capital gains are taxed again upon disposal, we should discuss recognizing holding taxes as necessary expenses."
President Lee Jae-myung has also mentioned the need to review a similar proposal. At a national real estate policy town hall on Aug. 23, Lee said of the proposal to recognize increases in holding taxes as necessary expenses for capital gains tax, "It seems to make sense," adding, "It's worth considering."
A bill was also introduced to raise the tax-free threshold for capital gains on a single home. People Power Party lawmaker Seo Myeong-ok introduced an amendment to the Income Tax Act to raise the tax-free threshold for a single-home household from the current 1.2 billion won to 1.5 billion won. It also includes raising the cap on the holding-period portion of the long-term holding special deduction from the current 40% to 50% and creating a new bracket for holdings of 12 years or more.
People Power Party lawmaker Park Su-min introduced an amendment to defer the timing of taxation on part of the capital gains tax when a single-home household that has held and lived in a home for at least three years sells it and moves to a cheaper home. Under the plan, the portion of capital gains on the original home corresponding to the purchase price of the new home would be taxed when the new home is sold.
From the ruling party came a bill to expand income deductions for jeonse tenants. Democratic Party of Korea lawmaker Yoon Hu-deok introduced an amendment to allow a no-home couple living separately due to work or other reasons to each claim an income deduction for repayment of principal and interest on housing lease loans, and to raise the combined deduction cap for couples from 4 million won per year to 6 million won. Allowing each spouse to claim a deduction is also included in the government plan, but the government plan's cap is 4 million won per year.
The government's tax amendment will undergo a notice-and-comment period through the 20th and is expected to be submitted to the National Assembly in early September. The government plan and lawmakers' proposals will be reviewed together by the National Assembly Strategy and Finance Committee's taxes subcommittee. Tax amendments are typically handled in early December along with the budget bill, but how much of the lawmakers' supplements will be reflected in the government plan is expected to be decided during the National Assembly's review.