Single-home owners face higher property tax from W3.5b, sharp rise above 4.6 billion

Even owner-occupiers of a single home will face a higher comprehensive real estate tax on properties valued at 3.5 billion won ($2.44 million) or more, with the burden rising sharply above 4.6 billion won. The top tax rate of 5.0% — previously reserved for owners of three or more homes — will now apply to ultra-high-value single and two-home owners as well, while the long-term holding deduction for capital gains tax will be capped at 1 billion won.

The criteria for deductions applied under both the comprehensive real estate tax and capital gains tax will shift from length of ownership to length of actual residence.

The government on Monday unveiled its 2026 tax reform package, which eliminates direct rate differences based on the number of homes owned and consolidates the tax base around property value.

The centerpiece of the package is a sweeping overhaul of real estate taxation. The comprehensive real estate tax reform in particular marks the first major restructuring since the current framework was established in December 2022, roughly four years ago.

The guiding principles are "normalization" and "rationalization." Deputy Prime Minister Koo Yun-cheol, who also serves as minister of finance and economy, said at a pre-briefing on Thursday that the government would "rationally reform the real estate tax system so that a residence-centered housing market takes hold, under the principle that a home is a place for living — not a commodity for buying."

He added that the government would "normalize taxation on homes valued above the 4 billion to 5 billion won range" and would "improve tax equity by normalizing excessive benefits — such as reducing the basic deduction amount — for non-occupied homes and multi-home holdings."

Under the reform, the comprehensive real estate tax system will shift from a housing-count basis to a property-value basis. The cap on annual tax burden increases will rise from the current 150% to 200% of the prior year's liability. The fair-market value ratio used to calculate the tax base will also increase from the current 60% to between 70% and 80%. High-value and non-occupied homes will face tighter taxation.

For owners of three or more homes, the only rate change is an increase from 1.0% to 1.3% in the bracket covering a tax base of more than 600 million won up to 1.2 billion won. Single-home owners, by contrast, will see rates rise across all five brackets above 600 million won, with the steepest increases in the ultra-high-value tiers.

Removing the rate differential based on housing count reflects criticism that owners of a single ultra-high-value home pay far less comprehensive real estate tax than owners of multiple homes with the same combined value — a disparity seen as inequitable. Rates will be restructured around combined property value rather than the number of homes held. The number of homes owned will, however, continue to affect tax rates indirectly even after the reform.

Other factors that determine the final tax bill — including the basic deduction amount and the fair-market value ratio — will also be revised. Non-residents and multi-home owners will be treated less favorably than residents and single-home owners.

The basic deduction amount currently stands at 1.2 billion won for single-household, single-home owners and 900 million won for all others. Starting next year, single-home owners will be divided into two categories — resident and non-resident — with deductions of 1.4 billion won and 900 million won respectively. The threshold for comprehensive real estate tax liability will be set at a publicly assessed value exceeding 1.4 billion won for single-household, single-home owners — equivalent to an apartment market price of about 2 billion won — and a combined publicly assessed value exceeding 900 million won for all other homeowners, equivalent to an apartment market price of about 1.3 billion won. A single-home owner who does not reside in the property will receive a smaller basic deduction than a resident, but will still only become liable for the comprehensive real estate tax once the apartment's market price exceeds 2 billion won.

Even owner-occupiers of a single home will see their comprehensive real estate tax increase on properties valued at 3.5 billion won or more, with the burden rising sharply above 4.6 billion won. The top rate of 5.0%, currently applied only to owners of three or more homes, will be extended to ultra-high-value single and two-home owners as well.

The fair-market value ratio, currently at 60%, will be raised uniformly to 70% next year. Owners of homes in designated adjustment zones — excluding single-household, single-home owners — and those holding three or more properties will see the ratio climb further to 80% by 2028.

Conditions for reducing the comprehensive real estate tax burden will be tightened or narrowed. Single-household, single-home owners currently receive a tax credit of up to 80% based on holding period (five years or more) and age (60 or older). Starting in 2028, the holding-period criterion will be replaced by a residency-period criterion. A new cap of 6 million won on the total credit amount will also be introduced.

The annual tax burden cap — currently set at 150% of the prior year's combined property tax and comprehensive real estate tax — will rise to 200% starting next year.

A monetary ceiling will be introduced for the long-term holding special deduction on capital gains tax, putting a brake on the current structure in which the deduction grows proportionally with the gain. After a one-year grace period, the cap will be set at 2 billion won in 2028 and reduced to 1 billion won from 2029 onward.

The holding-period deduction will be phased out and replaced by a residency-period deduction — to be called the "long-term residency income deduction." Under the current system, single-home owners who have held a property for at least three years and lived in it for at least two years may deduct up to 80% of the gain, at a rate of 4% per year for each of the holding and residency components, capped at 10 years. From 2029, the holding-period component will be eliminated and only the residency component will remain, at a rate of 8% per year up to a maximum of 80%.

The holding-period deduction for multi-home owners in non-designated zones — currently capped at 30% — will also be gradually converted to a residency-based deduction. Authorities expect the series of changes to reduce the expected returns from concentrating wealth in a single premium property.

To cushion the impact of the real estate tax overhaul, the government will offer multi-home owners an exit route and transitional relief. The heavy capital gains tax surcharge on homes in designated adjustment zones held for two years or more will be temporarily eased through 2028, giving owners an opportunity to sell.

The income threshold for single-household, single-home owners to qualify for a tax payment deferral will be raised from a total annual salary of 70 million won to 80 million won.

The tax reform package will be submitted to the regular National Assembly session as legislation after going through a public notice period and a Cabinet meeting.