Hello everyone! 😊
Today, let’s dive into capital gains tax on real estate and long-term ownership deductions.
When selling a property, one of the most important taxes to consider is capital gains tax.
However, if you have held onto your property for a long time, you may be eligible for a long-term ownership deduction, which can significantly reduce your tax burden!
Let’s break it down step by step. 👀
🔍 What is Capital Gains Tax on Real Estate?
Capital gains tax (CGT) is a tax imposed on the profit earned when selling a property.
In simple terms, it is a tax on the difference between the purchase price and the selling price.
💡 Capital Gains Tax Formula
📌 Capital Gains = Selling Price – (Purchase Price + Expenses + Long-Term Ownership Deduction)
📌 Capital Gains Tax = Taxable Gains × Tax Rate – Basic Deduction (KRW 2.5M)
✔ Applicable to: Land, buildings, and real estate-related rights (e.g., pre-sale contracts)
✔ Who Pays the Tax? The seller
✔ Filing Deadline: By the end of the month following the transaction settlement date
📌 Important Tip!
To minimize capital gains tax, make sure to properly document expenses (such as acquisition tax, brokerage fees, and renovation costs) and take advantage of long-term ownership deductions!
🏡 What is the Long-Term Ownership Deduction?
The long-term ownership deduction is a system designed to reduce taxes for individuals who have held a property for a long time.
This deduction allows you to reduce taxable capital gains based on the number of years you have owned the property.
✅ Eligibility for Long-Term Ownership Deduction
📌 Applies to primary residences (meeting tax-exempt requirements)
📌 Must own the property for at least 3 years
📌 Additional deductions available if residency requirements are met
✅ Long-Term Ownership Deduction Rates
Holding PeriodBasic Deduction (No Residency Requirement)Additional Deduction with Residency Requirement
| 3 years | 24% | 4% |
| 4 years | 32% | 8% |
| 5 years | 40% | 12% |
| 6 years | 48% | 16% |
| 7 years | 56% | 20% |
| 8 years | 64% | 24% |
| 9 years | 72% | 28% |
| 10+ years | 80% | 40% |
💡 In other words, if you own and live in the property for at least 10 years, you can receive a total deduction of up to 80%!
📌 If a homeowner owns and resides in a property for 10+ years → Additional 40% deduction (Total: 80%)
🔹 Example Calculation of Capital Gains Tax
Let’s say you purchased a house for KRW 500 million (5 billion KRW) 10 years ago and sold it for KRW 1 billion (10 billion KRW).
✔ Capital Gains = 1B – 500M = 500M KRW
✔ Long-Term Ownership Deduction (10 years ownership + 10 years residency) = 80% deduction → 500M × 80% = 400M deduction
✔ Taxable Capital Gains = 500M – 400M = 100M KRW
👉 Thanks to the long-term ownership deduction, the taxable amount is significantly reduced, which helps lower your capital gains tax! 😍
📌 Summary & Key Takeaways
✅ Capital gains tax applies to profits earned from selling real estate.
✅ Utilizing the long-term ownership deduction can significantly reduce your tax burden.
✅ Homeowners who own and live in their property for 10+ years can receive a maximum deduction of 80%!
✅ Ensure you file your taxes on time to avoid penalties.
📢 Planning to sell your property?
Make sure to check your capital gains tax obligations and take advantage of long-term ownership deductions to save money! 😊
