Government Weighs Overhaul of 'Long-term Holding Deduction' to Reduce Tax Breaks for Expensive Homes

A system that significantly reduces capital gains tax on properties held for long periods is expected to be adjusted. Currently, single-homeowners who hold a property for more than 10 years can receive tax benefits of up to 80% on their capital gains. However, the government is pursuing plans to lower this benefit cap or tighten requirements, arguing that the current system disproportionately benefits owners of expensive homes.

The Long-term Holding Special Deduction was introduced to encourage long-term home ownership and curb speculative trading. However, statistics show that nearly 70% of these benefits are concentrated in the three Gangnam districts and Yongsan District in Seoul. In the past, there was even a case in Gangnam District where a taxpayer received over 20 billion won in deductions. The Commissioner of the National Tax Service stated that the deduction shows regressive characteristics that guarantee unearned income, contrary to its original intent of curbing speculation and inducing long-term holding.

The government plans to increase the tax burden on owners of ultra-high-value homes to improve tax fairness. It is currently reviewing lowering the cap on the Long-term Holding Special Deduction and redefining the criteria for ultra-high-value homes. Discussions are also underway to raise the threshold for the Comprehensive Real Estate Holding Tax from the current 1.2 billion won. Kim Yong-beom, the Senior Secretary for Policy at the Presidential Office, stated that they are gathering opinions on the criteria for ultra-high-value homes and the setting of the deduction limit.

The government plans to reflect these measures in the tax reform plan to be announced early next month.