Since the government's 2026 tax code revision bill, announced last month, was submitted to the regular National Assembly session on Sept. 3, inquiries about changes to the long-term holding special deduction have risen sharply, particularly in Seoul's Gangnam area. Owners of a single home who have held it for many years are especially unsure whether the revision helps or hurts them. The bill must still clear parliamentary review and a vote, but the scope of the overhaul is wide and the effective date is near, so it is worth understanding the details in advance.
Under the current system, the special long-term holding deduction for one home per household applies a 4% rate for each year of ownership and for each year of residence. If both periods reach 10 years or more, the total deduction can reach 80%. That is why an owner who held a home for more than 10 years without living in it could still claim a 40% deduction based on the holding period alone. The government argues this structure has effectively favored so-called gap-investment single-home owners — those who hold a home unrelated to actual residential demand — and says the revision shifts the balance toward people who actually live in their homes. Tax practitioners, meanwhile, raise fairness concerns, noting that owner-occupiers who have lived in their homes for years with no plan to sell will also be affected.
The revision has two central elements. First, the deduction rate, which applied equally to the holding period and the residence period, will be reweighted toward residence. In 2028, a transitional rate applies: 6% a year for residence and 2% a year for ownership. From 2029, the deduction for the holding period disappears entirely and only residence counts, at 8% a year. In effect, a home that was held but never lived in will receive no long-term holding deduction at all from 2029.
Second, a cap on the deduction amount will be introduced for the first time. Until now, only the deduction rate was capped, at 80%, with no limit on the amount itself. Under the revision, the deduction will be limited to 2 billion won in 2028 and 1 billion won from 2029. The same bill also raises the fair market value ratio for the comprehensive real estate holding tax and lifts rates in the ultra-high-value brackets, so districts dense with expensive homes face higher holding taxes and capital gains taxes at the same time.
One point must be made clearly here: the two-year residence requirement for a tax exemption on homes in designated adjustment zones must be distinguished from the residence period that determines the long-term holding deduction rate. The two-year requirement is the minimum condition for claiming an exemption on a transfer price of up to 1.2 billion won. The revision, by contrast, ties the deduction rate on capital gains attributable to the portion above 1.2 billion won to the actual number of years of residence. So meeting the two-year exemption requirement is no reason for comfort; the actual length of residence must be assessed separately.
Because both changes take effect together, the tax burden will vary widely depending on ownership and residence history and on the price of the home. Specific cases make the difference clearer.
First, consider a home that was held but not lived in. A client, identified as A, bought an apartment in Seoul for 500 million won. When a transfer to a provincial post 10 years ago made living there impractical, they leased it out and lived elsewhere. Now approaching retirement, they sought advice while weighing a sale of the apartment for 2 billion won. Because only capital gains attributable to the portion above 1.2 billion won — the exemption threshold for one home per household — are taxable, roughly 600 million won of the total 1.5 billion won in capital gains is subject to tax. Selling now would bring a 40% deduction for 10 years of ownership, cutting the tax base to 360 million won. Selling after 2029, however, would leave the deduction rate at 0% because there is no residence history, keeping the tax base at 600 million won. The same home, in other words, yields a sharply different tax base depending on when it is sold. Single-home owners like A, with no record of living in the home, should consider moving up the timing of a sale.
Second, even those who have lived in their homes cannot relax if the property is in the ultra-high-value range. A client identified as B bought a Gangnam apartment for 500 million won and has lived in it for 10 years, and plans to sell it for 4 billion won. Of the total 3.5 billion won in capital gains, about 2.45 billion won is taxable. Under the current rules, a 80% deduction for 10 years of ownership and residence cuts the tax base to 490 million won, with tax estimated at about 187 million won including local income tax. From 2029, however, even with the deduction rate held at 80%, the deduction amount will be capped at 1 billion won. That raises the tax base to 1.45 billion won and the tax to about 645 million won — more than triple. In short, even single-home owners who meet the residence requirement could see their tax burden rise sharply because of the cap. Districts dense with ultra-high-value homes will feel this change most.
As both cases show, the key to responding is the timing of a sale. Under the revision, 2028 applies a 6% annual rate for residence and 2% for ownership, and from 2029 the rate is determined by residence alone. It is therefore necessary to compare the tax burden of selling by 2027 against selling in 2028 or after 2029. Anyone who acquired a home through inheritance or gift should also check how the ownership and residence periods are calculated. Those who obtained a new apartment through reconstruction or redevelopment, by way of an association member's occupancy right, need to examine separately whether the residence period of the previous home can be counted. Because the bill is still under parliamentary review, details such as deduction rates and limits could change during the legislative process.
The long-term holding special deduction has long been the signature tax-saving tool for owners of one home per household. If the revision takes effect, however, the decisive factor in the tax burden shifts from how long a home was held to how long the owner lived in it. Owners of expensive homes weighing a sale should compare the tax burden at different sale dates, based on their actual residence period and expected capital gains. Even before the detailed rules are finalized, it is worth reviewing possible scenarios in advance with a tax professional.
