South Korean tax authorities announced reforms to the capital gains tax system on Monday to curb deduction abuse and encourage home sales.
These changes target high-value real estate markets, such as the Gangnam district of Seoul, where existing laws allowed for excessive tax breaks that the government now views as exploitative.
Under the new system, the long-term holding special deduction will be renamed the long-term residence deduction [1]. This shift ensures that tax breaks apply only to periods when the owner actually lived in the property [1]. To prevent extreme cases, such as a single Gangnam home seller who previously claimed a 200 billion KRW deduction [1], the government will implement a cap of 10 billion KRW per property [1].
While the residence-based rules and the 10 billion KRW cap take effect in 2029 [1], other changes will arrive sooner. The basic annual deduction will increase from 2.5 million KRW to 25 million KRW [1].
Additionally, the government is offering a temporary window to stimulate the housing market. Higher tax rates typically applied to owners of multiple homes will be relaxed during 2027 and 2028 [1]. This measure is intended to incentivize multiple-home owners to list their properties for sale by lowering the financial penalty of doing so [2].
"The long-term holding special deduction for capital gains tax will be renamed to the long-term residence income deduction," said YTN reporter Lee Seung-eun [1].
Lee said that starting in 2029, the government will only reduce taxes for the actual period of residence, up to a maximum of 10 billion KRW [1]. Regarding the relief for multiple-home owners, Lee said the government decided to temporarily relax the heavy tax rates in the coming year and 2028 to induce more properties to enter the market [1].
“The long-term holding special deduction for capital gains tax will be renamed to the long-term residence income deduction.”
The South Korean government is attempting a delicate balancing act: tightening rules for ultra-wealthy homeowners to prevent tax avoidance while simultaneously easing burdens for multi-home owners to increase housing supply. By shifting the deduction focus from simple ownership to actual residence, the state aims to discourage speculative real estate investment and prioritize genuine homeowners.
