The South Korean government is set to revise the long-term ownership tax benefits for homeowners, focusing on actual residency. Starting in 2028, homeowners will no longer receive tax benefits if they do not reside in their property, even if they have owned it for 10 years.
The Ministry of Finance announced on August 3 that it will transition the long-term ownership special deduction to a long-term residency income deduction.
Under the current system, homeowners can receive a maximum tax deduction of 80% based on a 4% deduction rate for both ownership and residency periods. This means that homeowners can benefit from a total of 80% in tax deductions.
The new plan aims to gradually reduce the benefits associated with ownership duration while increasing the deductions for actual residency. The current system will remain in place until 2027, but starting in 2028, the ownership deduction will be reduced to 2% per year, while the residency deduction will increase to 6% per year. By 2029, the ownership deduction will be completely eliminated, allowing for a maximum residency deduction of 80% at an 8% rate.
As a result, homeowners who have owned their property for over 10 years but have not actually lived in it will be excluded from the long-term ownership deduction. Conversely, the longer the residency period, the greater the tax benefits.
A Ministry official stated, "We aim to prioritize actual residents over investors who simply hold properties for extended periods."
The government also introduced a cap on the deduction amount. Currently, there is no upper limit on the deduction, but a new limit of 2 billion won will be established in 2028, which will be halved to 1 billion won the following year.
However, homeowners of high-value properties with significant capital gains may face increased tax burdens, as the maximum deductible amount will be limited even if the deduction rate remains at 80%.
On the other hand, the basic deduction for long-term residents will be increased. For homeowners who have lived in their property for over 10 years and whose transfer price is below 3 billion won, the basic deduction for capital gains tax will be expanded from 2.5 million won to 25 million won.
Measures have also been put in place for those unable to reside in their homes due to unavoidable circumstances. Periods of absence for reasons such as schooling, employment, medical treatment, or caring for parents will be recognized as residency for up to three years.
Additionally, during redevelopment or reconstruction, only half of the relocation period will be counted as residency. This adjustment acknowledges the unavoidable interruptions in residency during project execution while maintaining the principle of actual residency.
Deputy Prime Minister and Minister of Finance Koo Yun-cheol stated, "We will rationally reform the real estate tax system to establish a residency-centered housing market under the principle that a home is for living, not just for buying. We will normalize excessive benefits for unoccupied homes and multiple homeowners to enhance tax equity."
* This article has been translated by AI.
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