Korea's tax bill turns a 40% housing deduction into zero for owners who never moved in

Ten years lived and ten years held still adds up to 80% in 2028, with 60 points from residence and 20 from ownership, and it still reaches 80% from 2029 on residence alone ^[2]. The household that did what the government says it wants keeps its rate. What it loses is the amount, because until now the deduction was capped only as a rate, at 80%, with no limit in won ^[11].

From 2029 the deduction stops at 1 billion won ^[11]. At the top 80% rate that ceiling starts to bind once taxable gains pass 1.25 billion won ^[3], and the taxable gain is only the slice attributable to the transfer price above 1.2 billion won ^[14]. Gangnam is where inquiries have risen sharply since the bill went to the Assembly on Sept. 3 ^[3].

The case Seoul Economic Daily works through is the other side of the bill. A client it identifies as A bought a Seoul apartment for 500 million won, moved to a provincial post ten years ago, leased the place out and lived elsewhere, and is now weighing a sale at 2 billion won ^[15]. Of the 1.5 billion won gain, roughly 600 million is taxable ^[16]. Sell now and ten years of ownership brings 40%, cutting the base to 360 million won; sell after 2029 and the rate is zero, leaving the base at 600 million ^[17]. The base is 240 million won higher for the same apartment ^[1].

For that owner the schedule is a staircase down: 40% on a sale through 2027, 20% in 2028, nothing from 2029 ^[5]. The paper's advice to owners in A's position is to consider moving the sale forward ^[18].

The two-year rule is where I would expect people to get this wrong. Two years of residence in a designated adjustment zone is the minimum condition for the exemption on a transfer price up to 1.2 billion won ^[13]. It does very little for the rate on the gains above that line once residence years set the rate ^[14]. An owner with ten years held and two years lived goes from 48% today to 32% in 2028 to 16% from 2029 ^[4].

The government's case is that the old four-and-four structure favoured gap-investment single-home owners, those holding property unrelated to actual residential demand, and that the revision moves the benefit toward people who live in their homes ^[6]. Tax practitioners cited by the paper raise fairness concerns, pointing out that owner-occupiers who have lived in their homes for years with no plan to sell are affected too ^[7].

None of it is law. Parliamentary review and a vote come first, and the bill's scope is wide ^[2]. Owners with tenure and no residence record can sell into 2026 and 2027 at 40% ^[5], which is what the advice implies, and enough of them doing it moves prices and not only tax bills. The other route is to move back in and earn residence years at 8% each ^[9], which takes ten years to reach 80% and means giving up the rent for all ten.

In my view the staircase moves transactions well before it moves anyone's address. What would show that wrong is an Assembly amendment that lifts the 1 billion won cap or pushes the ownership deduction past 2029, after which a 2027 sale and a 2030 sale are priced the same.