When people sell a home in Korea after owning it for a decade, most assume the long hold will cut their tax substantially. Then they look up the long-term holding special deduction (장기보유특별공제) and run into a jumble of figures: 2% a year, 4% a year, a 30% cap, an 80% cap. What they actually want is a number: which rate applies to their home, and how many won of tax does that save?
This guide leads with numbers. First it runs the same gain through different holding and residence periods so you can see the tax change side by side. Then it covers the rate tables, the calculation order, and the counting mistakes that quietly cost people a bracket. Figures reflect Article 95 of the Income Tax Act as of September 2026. The government's August 2026 reform proposal, which would apply to sales from 2028, is covered separately in section 6.
1. Worked Examples at 5, 10 and 15 Years: How Much the Deduction Cuts the Tax
Results first. Both tables apply the ₩2.5 million basic capital gains deduction and the progressive basic rates (6–45%) that apply after two or more years of ownership. Local income tax (an extra 10% of the computed tax) and deductible expenses are left out to keep the arithmetic clean.
Case A. General asset (land, commercial property, a home not subject to surcharge): ₩300 million gain
| Holding period | Rate | Deduction | Tax base | Computed tax | Saving vs. no deduction |
|---|---|---|---|---|---|
| Under 3 years | 0% | ₩0 | ₩297.5M | ≈ ₩93.11M | — |
| 5 years | 10% | ₩30M | ₩267.5M | ≈ ₩81.71M | ≈ ₩11.40M |
| 10 years | 20% | ₩60M | ₩237.5M | ≈ ₩70.31M | ≈ ₩22.80M |
| 15+ years | 30% | ₩90M | ₩207.5M | ≈ ₩58.91M | ≈ ₩34.20M |
In every row the tax base stays inside the 38% bracket (₩150M–₩300M), so each ₩10 million of deduction removes about ₩3.8 million of tax. For general assets, a quick estimate of the saving is simply deduction × your marginal rate.
Case B. One-home household, high-value home (bought for ₩1.0B, sold for ₩1.8B, gain ₩800M)
A one-home household pays no tax on the portion of the sale price up to ₩1.2 billion. The taxable gain is therefore ₩800M × (₩1.8B − ₩1.2B) ÷ ₩1.8B ≈ ₩266.67 million. The holding and residence rates are applied to that amount.
| Held / lived in | Rate | Gain after deduction | Tax base | Computed tax |
|---|---|---|---|---|
| 2 yrs / 2 yrs | 0% | ≈ ₩266.67M | ≈ ₩264.17M | ≈ ₩80.44M |
| 3 yrs / 3 yrs | 24% | ≈ ₩202.67M | ≈ ₩200.17M | ≈ ₩56.12M |
| 5 yrs / 5 yrs | 40% | ₩160.00M | ₩157.50M | ≈ ₩39.91M |
| 10 yrs / 10 yrs | 80% | ≈ ₩53.33M | ≈ ₩50.83M | ≈ ₩6.44M |
| 15 yrs / 15 yrs | 80% | ≈ ₩53.33M | ≈ ₩50.83M | ≈ ₩6.44M |
| 10 yrs / 2 yrs | 48% | ≈ ₩138.67M | ≈ ₩136.17M | ≈ ₩32.22M |
| 10 yrs / under 2 yrs | 20% (general table) | ≈ ₩213.33M | ≈ ₩210.83M | ≈ ₩60.18M |
Three things stand out:
- Ten years owned and ten years lived in cuts the bill from about ₩80.4 million to about ₩6.4 million, a drop of more than 90%. The 80% rate removes most of the taxable gain, and the smaller base also falls into a lower progressive bracket.
- For a one-home household the rate stops at 80% after ten years; holding for 15 or 20 years adds nothing. General assets keep climbing until year 15, but the one-home table caps at year 10.
- With the same ten-year hold but less than two years of residence, the home drops to the general table (20%) and the tax becomes about ₩60.2 million, roughly ₩53.7 million more than the 10/10 case. In practice, residence is what decides the tax.
2. The Rate Tables: General Assets and One-Home Households Use Different Schedules
The deduction applies to land and buildings (including homes) held for three years or more, and to redevelopment membership rights for the period held before the management-and-disposal approval. What matters is which table you fall under, and there are only two.
| Period | General asset (holding) | One-home: holding portion | One-home: residence portion |
|---|---|---|---|
| 2 to under 3 years | — | — | 8% (if held 3+ years) |
| 3 to under 4 years | 6% | 12% | 12% |
| 4 to under 5 years | 8% | 16% | 16% |
| 5 to under 6 years | 10% | 20% | 20% |
| 6 to under 7 years | 12% | 24% | 24% |
| 7 to under 8 years | 14% | 28% | 28% |
| 8 to under 9 years | 16% | 32% | 32% |
| 9 to under 10 years | 18% | 36% | 36% |
| 10 years or more | 20%, then +2%p a year | 40% (cap) | 40% (cap) |
| 15 years or more | 30% (cap) | 40% | 40% |
- General assets: the rate builds by 2% a year from year three and caps at 30% in year fifteen. This covers land, commercial property, and homes that don't qualify as a one-home household's home (excluding those under the multi-home surcharge).
- One-home household: the holding portion (4% a year, up to 40%) and the residence portion (4% a year, up to 40%) are calculated separately and added, for a maximum of 80%. You must have lived in the home for at least two years while owning it; otherwise you fall back to the general table.
- Because a one-home household's sale is tax-free up to ₩1.2 billion, this table only matters in practice for the portion of a high-value home's price above that line.
3. How to Calculate It: Four Steps to the Gain After Deduction
Here is Case B again, step by step. Following this order by hand prevents most errors.
- Compute the gain. Sale price − purchase price − deductible expenses. Expenses include acquisition tax, brokerage fees, legal/registration fees, and capital improvements such as balcony extensions or new window frames. Case B: ₩1.8B − ₩1.0B = ₩800M.
- Pro-rate the portion above ₩1.2 billion (one-home households only). Gain × (sale price − ₩1.2B) ÷ sale price. ₩800M × ₩600M ÷ ₩1.8B ≈ ₩266.67M.
- Pick the rate and subtract. 10 years held (40%) + 10 years lived in (40%) = 80%. ₩266.67M × 80% ≈ ₩213.33M, leaving a gain after deduction of about ₩53.33M.
- Apply the basic deduction and rates. ₩53.33M − ₩2.5M ≈ ₩50.83M tax base. That sits in the 24% bracket: ₩50.83M × 24% − ₩5.76M progressive deduction ≈ ₩6.44M.
To isolate the saving, compare against the no-deduction case, which applies step 4 directly to the amount from step 2. In Case B, ₩80.44M − ₩6.44M ≈ ₩74 million is the tax the deduction removed.
4. Counting the Years and the Residence Requirement: One Day Can Cost a Bracket
The tables work in full years. Nine years and eleven months counts as nine years, so a one-home household's holding portion is 36% rather than 40%. Check these start and end points when you count.
| Item | Starts | Ends | Common mistake |
|---|---|---|---|
| Holding period | Acquisition date (earlier of final payment or registration filing) | Sale date (earlier of final payment or registration filing) | Counting from the contract date shifts the result by months |
| Residence period | Move-in date (resident registration) | Move-out date or sale date | Separate stretches of residence are added together |
| Inherited home | Date inheritance began | Sale date | The deceased's ownership years do not carry over for this deduction |
| Gift from a spouse etc. under carryover taxation | Donor's acquisition date | Sale date | Only when carryover taxation actually applies |
Pushing the closing date back by a month or two moves people up a bracket more often than you would think. Say you made the final payment on a home on November 20, 2016. A closing in October 2026 counts as nine years (36%). A closing on or after November 20, 2026 counts as ten (40%). In Case B those 4 percentage points are about ₩10.67 million of extra deduction, which means several million won less tax. Before you set a closing date, use the date calculator to count the full years between your acquisition date and the planned closing.
5. When the Deduction Disappears or Shrinks: A Situation Guide
Held under three years: no deduction at all
Three years of ownership is the entry point. After two years you get the basic progressive rates, but the deduction rate is still 0%. Even the one-home residence portion of 8% requires three years of ownership.
Multi-home surcharge in an adjustment area: excluded
The grace period on the multi-home surcharge ended on May 9, 2026. Owners of two or more homes who sell a home in an adjustment-target area now face the surcharge rates and lose the long-term holding deduction entirely. Outside those areas, even multi-home owners use the general table (up to 30%). The surcharge rules are covered in the real estate capital gains tax guide.
One-home household with under two years of residence: general table
This produces the biggest gaps in practice. Suppose you bought a single home with a tenant already in place and never lived there. If you sell it ten years later for more than ₩1.2 billion, you get 20%, not 80%. If you can still meet the two-year residence requirement before selling, that is the single most reliable way to cut the tax.
Unregistered and overseas assets: not eligible
An unregistered asset loses both the long-term holding deduction and the basic deduction and is taxed at 70%. Overseas real estate is not eligible for the deduction either.
6. Is the Deduction Being Abolished? What the 2026 Tax Reform Proposal Changes
Searches for "long-term holding deduction abolished" spiked after the government finalized its 2026 tax reform proposal on August 3, 2026. It is still a government proposal awaiting the National Assembly. If it passes as written, the schedule would be:
| Sale timing | One-home: holding portion | One-home: residence portion | Cap on deduction amount |
|---|---|---|---|
| Through December 31, 2027 | Current: 4%/yr, up to 40% | Current: 4%/yr, up to 40% | None |
| Sales in 2028 | 2%/yr, up to 20% | 6%/yr, up to 60% | ₩2 billion |
| 2029 onward | Abolished | 8%/yr, up to 80% | ₩1 billion |
The name would also split: homes would get a "long-term residence income deduction" and land and commercial property a "long-term holding income deduction." Land and commercial property would keep a holding-based deduction. From 2029, multi-home owners would only get 2% a year (up to 30%), and only on homes they lived in for at least two years. In short, homes that were only held lose most of the benefit, while one-home owners who actually lived there keep the rate but face a cap on the deduction amount.
For homes sold in October 2026, the current tables in sections 1–5 apply unchanged, and under the proposal they stay in place through the end of 2027. If you own a home you have mostly not lived in, wait for the outcome of the Assembly debate (usually settled in December) before deciding when to sell.
7. Frequently Asked Questions (FAQ)
Q1. Do I have to apply for the deduction?
There is no separate application. You claim it on the preliminary capital gains tax return, which is due within two months of the end of the month in which you sold, by entering the holding and residence periods and the rate. The Hometax filing screen also has fields for one-home status and residence period.
Q2. Do I need to calculate the deduction for a one-home sale under ₩1.2 billion?
If you meet the one-home exemption (two years of ownership, plus two years of residence for homes bought in an adjustment area) and the sale price is ₩1.2 billion or less, no tax is due, so there is nothing to deduct. The deduction applies only to the portion above ₩1.2 billion.
Q3. Does the residence have to be continuous?
No. All the time you actually lived there during ownership is added up and converted to full years. Because the move-in record on your resident registration and genuine occupancy both need to hold up, keep supporting documents.
Q4. Does an 80% rate mean my tax drops by 80%?
Not necessarily. The 80% applies to the taxable gain, and because the rates are progressive, the actual reduction can be larger or smaller. In Case B the tax base fell from the 38% bracket to the 24% bracket, and the tax dropped by about 92%.
8. Plug the Post-Deduction Gain into the Calculator for the Final Figure
The capital gains tax calculator runs a simplified calculation at standard rates, so it does not subtract the long-term holding deduction for you. The workflow is: find the rate for your holding and residence years in the table in section 2, then use steps 1–3 of section 3 to get the gain after deduction. Enter that amount as the gain, choose a holding period of two years or more, and the calculator applies the ₩2.5 million basic deduction and the progressive brackets to give you the estimated tax. Run it two or three times with different rates and you can see for yourself how much one more year of ownership would save.
If you're unsure how many full years you have, check the days between your acquisition date and planned sale date with the date calculator. The real estate capital gains tax guide covers the full structure, including the ₩1.2 billion exemption and the multi-home surcharge, and how apartment property tax is calculated covers the annual tax while you own the home. Before you file, confirm your figures with Hometax's mock calculation or a tax accountant.
