A one-year temporary suspension of heavier capital gains taxes on home sales by multiple-home owners will end on May 9. Starting May 10, owners who sell homes in regulated areas are expected to face a sharply higher tax burden on gains.
An exception remains. In some areas, sellers can keep the tax break through November if they complete an application for land transaction approval by May 9.
According to the Ministry of Finance and Economy and other officials on May 3, once the suspension ends, multiple-home owners selling in regulated areas could face an effective tax rate of up to 82.5%.
Under current rules, the basic capital gains tax rate ranges from 6% to 45%. From May 10, an additional surcharge applies in regulated areas: 20 percentage points for owners of two homes and up to 30 percentage points for those with three or more. Adding local income tax of 10% brings the effective top rate to about 82.5%.
With concerns rising over a sudden jump in tax bills, the government set out an exception: If a seller files the land transaction approval application by May 9, the basic rate applies even if the approval and final payment are delayed as late as November.
For Seoul’s Gangnam 3 districts (Seocho, Gangnam and Songpa) and Yongsan-gu, which were regulated areas before the 10·15 measures, the sale process must be completed by Sept. 9 to avoid the surcharge. For other Seoul districts and 12 areas in Gyeonggi Province designated later, the deadline is Nov. 9.
As the end of the suspension nears, attention is also turning to possible changes in real estate taxation, including the long-term holding special deduction for capital gains. The deduction was introduced to ease the tax burden on nominal gains driven by inflation and to encourage long-term ownership.
Under the current Income Tax Act, owners of general real estate held for at least three years can deduct 2% per year, up to 30% for 15 years. For one-home households, the deduction can reach 80% by combining holding and residency periods.
For example, if a person has owned and lived in a single home for at least 10 years, a 40% holding-period deduction and a 40% residency deduction can apply, excluding up to 80% of the gain from taxation.
Critics say a deduction as high as 80% can amount to an excessive tax benefit for owners of expensive homes. President Lee Jae-myung previously raised concerns about the structure of the deduction on X.
Moves toward tax changes are also gaining traction in politics. Independent lawmaker Choi Hyuk-jin introduced an amendment to the Income Tax Act that would, among other items, remove deductions for nonresidents and apply a 16% to 80% deduction rate to one-home households that have held a home for at least three years and lived in it for at least two. Another bill, introduced by Jinbo Party lawmaker Yoon Jong-oh, calls for abolishing the long-term holding special deduction.
However, the bills have not been coordinated with the government, leaving their prospects unclear. Some observers expect real estate-related measures could be included in a tax package scheduled for July.
A government official said, “Nothing has been decided yet,” adding that authorities are “reviewing the timing and methods comprehensively.”
* This article has been translated by AI.
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