Im Kwang-hyun, head of the National Tax Service, has raised concerns about the concentration of long-term home ownership tax benefits in Seoul and high-value homes, calling for a reform of the system. He argued that while protections for middle-class homeowners should be maintained, the current structure, which allows unlimited deductions for high-value homes with significant capital gains, needs to be normalized.
On July 26, Im posted on his social media platform X (formerly Twitter) under the title 'Long-Term Home Ownership Tax Benefit, High-Value Homes, and Regressivity,' stating, "The current long-term home ownership tax benefit is excessively regressive."
The long-term home ownership tax benefit applies to homes with a transaction price exceeding 1.2 billion won. Homes priced at 1.2 billion won or less are exempt from capital gains tax if they meet non-taxable conditions, such as being held for more than two years, according to Im.
Under the current system, homeowners who have owned and lived in their homes for more than ten years can receive a deduction of up to 80% on taxable capital gains without a separate limit.
Im pointed out, "The more expensive the home, and therefore the greater the capital gain, the more deductions are received. This contradicts the basic principle of taxation, where those with higher incomes bear a greater tax burden."
According to an analysis of capital gains tax reporting statistics by the National Tax Service for 2024, the total amount of long-term home ownership tax benefits applied to 24,816 homes nationwide was 5.32 trillion won. Of this, approximately 4.5 trillion won, or 90%, was attributed to homes in Seoul.
Within Seoul, the benefits were concentrated in the three districts of Gangnam and Yongsan. The tax benefits for these four districts amounted to about 3.5 trillion won, accounting for 78.6% of the total benefits in Seoul. In contrast, areas such as Dobong, Geumcheon, Jungnang, Nowon, Dongdaemun, Gwanak, Eunpyeong, and Guro received almost no tax benefits.
The regional concentration of benefits for high-value homes was even more pronounced. Among the top 100 homes receiving the most long-term home ownership tax benefits nationwide, 99 were located in Seoul, with Gangnam accounting for 68 and Seocho for 19.
The average tax benefit for homes in Gangnam was 4.1 billion won, while in Seocho, it was 3.3 billion won. The combined tax benefits for these two areas made up 88.3% of the total benefits for the top 100 homes, with one case in Gangnam receiving over 20 billion won in deductions for a single home sale.
Im described this situation as "the epitome of regressivity," stating, "The capital gains from rising real estate prices are disproportionately enjoyed by high-value homeowners, with the long-term home ownership tax benefit effectively guaranteeing unearned income."
He added, "The system encourages the ownership of a 'single high-value property.' While it is reasonable to protect middle-class homeowners, we must examine whether it is appropriate to apply unlimited long-term home ownership tax benefits to high-value homes."
The long-term home ownership tax benefit rate for one-home households was raised to a maximum of 80% in 2009 and has been operating without a separate deduction limit since then. Im stated, "While it is preferable for the tax system to maintain consistency, if unexpected side effects have occurred, it is the government's duty to make fine adjustments. We must normalize tax benefits fairly so that everyone can understand."
* This article has been translated by AI.
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