Hold the same home for 15 years and sell it, and Korea's long-term holding special deduction may come to 30% or to 80%. The dividing line is a single condition: whether you actually lived there for at least two years during the ownership period. Fall short and you get Table 1, which accrues 2 percentage points a year to a 30% cap. Clear it and you move to Table 2, which counts ownership at 4 points a year and residence at 4 points a year and adds the two for a maximum of 80%.
That gap in deduction rates becomes a gap in tax. In the worked example below — a single-home household selling for 1.5 billion won — changing residence alone from zero to ten years moves the computed tax from 16.5 million won to 2.4 million won, a factor of about 6.9.
Table 1 counts 2% a year; Table 2 counts 4% plus 4%
The deduction schedule published by the National Tax Service splits in two. Table 1 looks only at how long you owned the asset. It starts at three years and climbs 2 points annually until it stops at 30% from fifteen years. This is the general form, applying to most assets, land included.
Table 2 opens only for a one-home household. Its ownership component starts at 12% for three years, rises 4 points a year and caps at 40% from ten years; its residence component starts at 8% for two-to-three years and likewise caps at 40% from ten years. Added together, the ceiling is 80%.
One point is easy to miss. The residence component of Table 2 is not a bonus bolted onto the ownership figure — it is also the ticket into Table 2 at all. As the guide at Taxsim spells out, residence of under two years throws you back to Table 1 entirely. Fifteen years of ownership without ever having lived there ends at 30%.
Two years of residence is not a condition that adds 8 percentage points. It is the condition that unlocks the 40% ownership table.
Nothing is taxed until the price clears 1.2 billion won
Meet the exemption conditions as a one-home household and a sale price up to 1.2 billion won carries no capital gains tax. Exceeding it does not tax the whole gain either. The formula explained by the Korea Economic Daily runs:
Taxable gain = total gain x (sale price − 1.2bn won) ÷ sale price
That apportionment ratio climbs quickly as the price rises. Computing it across price points shows where the boundary sits.
| Sale price (100m won) | Excess over 1.2bn (100m won) | Taxable share (%) | Taxable gain on a 500m gain (10k won) |
|---|---|---|---|
| 13 | 1 | 7.69 | 3,846 |
| 15 | 3 | 20.00 | 10,000 |
| 18 | 6 | 33.33 | 16,667 |
| 20 | 8 | 40.00 | 20,000 |
| 24 | 12 | 50.00 | 25,000 |
Sell at 1.3 billion and only 7.7% of the gain is taxable; sell at 2.4 billion and half of it is. The influence of the deduction rate on the final bill scales with that same ratio. Near 1.2 billion the difference between 30% and 80% is a few hundred thousand won; in the 2-billion range it runs to tens of millions.
A 1.5bn-won sale, and what residence does to the tax
Put numbers on it. Assume an acquisition cost of 800 million won, 30 million won of qualifying expenses, a sale price of 1.5 billion won, and 15 years of ownership by a one-home household. The total gain is 1.5bn − 800m − 30m = 670 million won, and the taxable gain is 20% of that, or 134 million won. Fifteen years of ownership pins the Table 2 ownership component at its 40% cap, so only residence varies. The basic deduction of 2.5 million won and the 2026 basic rates with their progressive offsets are applied.
| Residence | Deduction (%) | Deduction (10k won) | Tax base (10k won) | Computed tax (10k won) | Incl. local tax (10k won) |
|---|---|---|---|---|---|
| Under 2 years (Table 1) | 30 | 4,020 | 9,130 | 1,651.5 | 1,816.7 |
| 2 years | 48 | 6,432 | 6,718 | 1,036.3 | 1,139.9 |
| 5 years | 60 | 8,040 | 5,110 | 650.4 | 715.4 |
| 10 years or more | 80 | 10,720 | 2,430 | 238.5 | 262.4 |
Moving residence from zero to two years alone cuts the bill including local income tax from 18.17 million won to 11.40 million, a saving of 6.77 million. One more year lifts the rate another 4 points, and ten years brings it down to 2.62 million. Top row to bottom row is a difference of 15.54 million won, or 6.9 times.
The decline is not even, and that is worth noticing. The drop between zero and two years of residence is the largest, and it flattens afterwards. The 18-point jump in the deduction rate pushes the tax base across a bracket boundary at the same time — here from 91.3 million won, in the 35% band, down to 67.18 million, in the 24% band. Much like the disposal deadline for temporary two-home status, a single period requirement drags the marginal bracket down with it.
When the deduction falls short
The cases collected by Heumtax narrow the reasons a deduction lands lower than expected. The most common is that ownership and residence start counting on different dates. Ownership runs from acquisition, while residence counts only the period you were registered and actually living there, so a home rented out on jeonse (a lump-sum deposit lease) before the owner moved in shows two very different numbers.
Fail the exemption conditions themselves and Table 2 was never available. Selling while holding multiple homes, or falling short of the two-year ownership requirement, puts you there. In that case the 1.2-billion apportionment does not apply either and the entire gain is taxable, so the exemption test comes before the deduction rate. Note also that unlike the 1.2bn and 1.8bn thresholds in the comprehensive real estate tax, the 1.2 billion here is not a per-person allowance but the point at which a single property starts to be taxed.
Household composition is another variable. One-home status is judged on the homes held by the whole household, not by the individual. If a family member in the same registered household owns another property, the special treatment does not apply, and fifteen years of living there still leaves only Table 1's 30%.
What to check
- Registered residence period — pull the resident registration abstract and confirm the move-in and move-out dates for that address. It is counted separately from ownership, and under two years closes Table 2 outright.
- Whether the price clears 1.2 billion won — at or below it the sale is exempt. Since the excess ratio sets the taxable gain, run the apportionment across your likely price range first.
- Documentation for qualifying expenses — check whether receipts survive for acquisition tax, brokerage fees and capital improvements. Reducing the total gain reduces the taxable gain in the same proportion.
- Homes held across the whole household — count properties held by a spouse and any family in the same registered household as of the transfer date.
- Start dates for ownership and residence — homes acquired by inheritance, gift or reconstruction can have different starting points. Compare the register against how the property was acquired.
- Which bracket the tax base straddles — knowing whether a few points of deduction would cross a rate boundary tells you what one more year of residence is actually worth.
Sources
- Long-term holding special deduction rates — National Tax Service
- Calculating capital gains tax on homes selling above 1.2 billion won — Korea Economic Daily
- The long-term holding deduction, essential for owners above 1.2 billion won — Heumtax
- How the long-term holding deduction is calculated (Tables 1 and 2) — Taxsim