The government is shifting the basis for the comprehensive real estate tax from the number of owned homes to the total value of the properties. Additionally, the long-term capital gains tax exemption, previously based on ownership duration, will now focus on actual residency. The plan aims to reduce the burden on primary homeowners while scaling back benefits for high-value, non-resident, and multi-home owners.
On August 3, the Ministry of Economy and Finance held a meeting of the Tax Development Advisory Committee to announce the "2026 Tax Reform Plan." The comprehensive real estate tax will be gradually reformed from 2027 to 2028, while the capital gains tax will undergo a transitional period until 2029.
Starting in 2028, the tax rate structure for the comprehensive real estate tax will be unified based on property value, regardless of the number of homes owned. Currently, different tax rates apply to owners of one or two homes compared to those with three or more, leading to disparities in taxation for properties of the same value. The reform aims to enhance tax equity by eliminating the number of homes as a criterion.
The basic deduction for primary homeowners will increase from 1.2 billion won to 1.4 billion won. This year, properties valued at approximately 2 billion won will be exempt from the comprehensive real estate tax. However, for homeowners who do not reside in their property, the basic deduction will decrease to 900 million won.
The current fair market value ratio of 60% will rise to 70% for both resident and non-resident single-home owners by 2028. For those owning three or more homes and those with two homes in designated adjustment areas, the ratio will increase to 80%. The tax rate for high-value properties will also be strengthened, and the upper limit for property tax burdens will rise from 150% to 200% of the previous year's tax amount.
Tax credits for seniors and long-term homeowners will shift to focus on residency duration. While the long-term holding exemption will be reduced, a new residency-based exemption will be introduced. The combined limit for senior and residency-based tax credits will be capped at 8 million won in 2027 and 6 million won in 2028.
As a result, primary homeowners will be exempt from the comprehensive real estate tax for properties valued up to 2 billion won, with tax amounts decreasing for properties valued between 2 billion and 3 billion won. For properties valued between 3 billion and 4 billion won, tax amounts will remain relatively stable, but those exceeding 4 billion to 5 billion won will see a significant increase in tax burden.
For non-resident single-home owners and multi-home owners, tax burdens will generally increase regardless of property value. The projected increase in comprehensive real estate tax revenue due to the reform is estimated at 800 billion won in 2027, 1.1 trillion won in 2028, and 300 billion won in 2029, totaling 2.2 trillion won, excluding the rural special tax.
The long-term capital gains tax exemption will also be redesigned to focus on actual residency. Currently, single-home owners can receive a deduction of 4% per year based on both ownership and residency duration, with a maximum of 80%.
By 2028, the ownership duration deduction will be reduced to 2% per year, with a maximum of 20%, while the residency duration deduction will increase to 6% per year, with a maximum of 60%. Starting in 2029, the ownership duration deduction will be eliminated, and the residency duration deduction will be set at 8% per year, with a maximum of 80%. The deduction limits will decrease to 2 billion won in 2028 and 1 billion won in 2029.
Periods of unavoidable absence due to schooling, work, illness, or caring for parents will be recognized as residency for up to three years. For redevelopment and reconstruction projects, about half of the duration will be counted as residency.
To provide selling opportunities in light of the strengthened property tax, the additional capital gains tax for multi-home owners will be temporarily eased. The additional tax rate for two-home owners will be reduced by 5 percentage points in 2027 and 10 percentage points in 2028, while for those with three or more homes, the rates will be lowered by 10 percentage points and 15 percentage points, respectively. Starting in 2029, the rates will revert to the current levels of 20 percentage points and 30 percentage points.
Concerns have been raised about the unpredictability of real estate policies, as the government has lowered tax rates just three months after ending the temporary suspension of the additional capital gains tax for multi-home owners in May. The government plans to apply the reduced rates to transactions that were subject to the additional tax after the suspension resumed on May 10.
The special provisions for win-win rental housing, which exempt the residency requirements for tax-free status and long-term holding exemptions for single-home owners, will end this year, as the rental increase rate is limited to within 5%. The government believes the effectiveness of these provisions has diminished due to the implementation of the monthly rent cap and that they provide excessive benefits to non-residential properties.
Jo Man-hee, head of the Tax Division at the Ministry of Economy and Finance, stated, "The primary goal of this real estate tax reform is not to stabilize housing prices but to normalize the tax system. While increasing the supply of properties from multi-home owners or landlords may have a secondary effect on stabilizing housing prices, that is not the main objective."
* This article has been translated by AI.
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