The government is expected to reduce tax benefits for long-term holdings of non-residential properties and increase property taxes on high-value homes. Additionally, reforms to the long-term holding special deduction for actual residents are anticipated.
According to Yonhap News on July 12, the Ministry of Economy and Finance is working on a plan to reform the real estate tax system. Previously, the ministry commissioned a study on measures to normalize the housing market, focusing on the comprehensive real estate tax and capital gains tax.
Currently, homeowners with one property can receive tax benefits regardless of whether they reside in the home. If they hold the property for more than five years, they can receive deductions ranging from 20% to a maximum of 50%, with additional tax credits of 20% to 40% available for owners aged 60 and older on the tax date. These two deductions can be applied simultaneously, up to a maximum of 80%, meaning that higher-value homes receive greater tax benefits.
In response, the government is considering measures to increase the burden on high-value homes to curb speculation. The current threshold for imposing the comprehensive real estate tax on a single home is set at a publicly assessed value of 1.2 billion won. As housing prices rise, the number of homes subject to this tax is also increasing.
The amount of the comprehensive real estate tax is determined by various factors, including the publicly assessed value of the home, the basic deduction amount, and the tax rate. The government plans to adjust these factors equitably to arrive at a final burden level.
Currently, a realization rate of 69% is applied when determining the publicly assessed value. For the comprehensive real estate tax, a fair market value ratio of 60% is used, with a basic deduction of 120 million won for single homeowners and 90 million won for multiple homeowners. The government intends to strengthen the comprehensive real estate tax while gradually implementing the timing of factors that affect the tax amount, aiming to encourage the sale of non-residential and speculative properties.
Revisions to the long-term holding special deduction are also expected to focus on actual residents. Under the income tax law, this deduction allows single homeowners to receive up to 80% off their capital gains tax. This means that even without residing in the property, they can still benefit from a maximum of 40%.
The key issue in this reform will be how much the 40% holding benefit will be reduced. It is also reported that while the holding benefit may decrease, the residency benefit for actual residents will likely increase, drawing attention to the extent of changes to the long-term holding special deduction. If the holding deduction is reduced to 0%, there are predictions that the name of the deduction itself may change.
Meanwhile, President Lee Jae-myung is scheduled to hold a real estate forum on July 23. He has proposed discussing the tax rates for property ownership, including single homes for actual residents, non-residential single homes, and multiple property owners.
Taxation criteria and the methods for imposing taxes on high-value single homes are expected to be key topics of discussion, particularly regarding the definition of 'high-value single homes.'
The government is expected to finalize the real estate tax reform based on the opinions gathered during the forum.
* This article has been translated by AI.
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