Temporary two-home owners in regulated zones must sell previous home within 2 years to keep tax benefits

Temporary two-home owners who acquire a new home while still holding an existing property in a regulated zone will now be required to sell the previous home within two years to qualify for the single-household tax exemptions on capital gains and comprehensive real estate taxes.

The exclusion of multi-home owners from the heavier capital gains tax surcharge and the corporate tax surcharge on purchase-rental apartments in regulated zones will in principle be capped at the end of 2027. The mutual-benefit rental tax break will expire at the end of this year, and the exemption from the two-year residency requirement will thereafter apply only to homes sold within one year of the mutual-benefit rental arrangement ending.

The government approved amendments Tuesday to the enforcement decrees of the Income Tax Act, Corporate Tax Act, Comprehensive Real Estate Tax Act, and Inheritance and Gift Tax Act at a Cabinet meeting. The changes follow up on the 2026 tax reform plan announced Aug. 3, and the revised decrees take effect Thursday.

Under the changes, the window for temporary two-home owners in regulated zones to benefit from the single-household tax exemption will be shortened from three years to two. Currently, a person who already owns a home in a regulated zone and acquires another in the same zone — becoming a temporary two-home owner — has three years to claim the single-household exemptions for capital gains and comprehensive real estate taxes.

The capital gains exemption covers the portion of the sale price up to 1.2 billion won ($882,000) and allows a long-term holding deduction of up to 80 percent. The comprehensive real estate tax exemption includes a basic deduction of 1.2 billion won along with tax credits for elderly owners and long-term holders.

For capital gains tax purposes, the new rules apply to homes newly acquired after Aug. 4 where the previous home is sold after Thursday. For the comprehensive real estate tax, the new rules apply to homes newly acquired after Aug. 4 where the tax liability arises as of June 1, 2027.

However, homes acquired before Aug. 3 — or where a sales contract was signed and a deposit paid before that date — remain subject to the previous rules.

A deadline will also be set for the exemptions from the capital gains tax surcharge and the corporate tax surcharge on purchase-rental apartments in regulated zones. Currently these exemptions apply permanently even after a rental registration is canceled, but going forward they will in principle be available only for properties sold by Dec. 31, 2027.

However, separate deadlines apply where a mandatory rental period has not yet expired or where reconstruction or redevelopment is under way. Properties whose mandatory rental period has not ended as of Jan. 1, 2027, may claim the exemption for up to one year from the date the rental registration is canceled.

Where a redevelopment management and disposal plan or a reconstruction association establishment approval is obtained before the surcharge-exclusion deadline expires, the exemption applies until one year after the date of the transfer notice. If both conditions are met, the later of the two dates governs.

The deadline applies only to long-term general and short-term purchase-rental apartments in regulated zones. Non-apartment properties in regulated zones, apartments outside regulated zones, and construction-rental and public-support housing retain their existing exemptions.

The single-household capital gains tax exemption for the primary residence of a rental business operator who holds purchase-rental apartments in a regulated zone remains unchanged. For five years from the date of rental registration cancellation, the operator may claim the capital gains exemption on the portion of the sale price up to 1.2 billion won and the long-term holding deduction of up to 80 percent, even as a multi-home owner.

Tax benefits for mutual-benefit rental housing will also be adjusted. Under the current rules, landlords who keep rent increases within 5 percent and rent for two years are exempt from the two-year residency requirement needed to qualify for the single-household capital gains exemption and the enhanced long-term holding deduction of up to 80 percent.

The benefit will end as originally scheduled at the end of this year. A new disposal deadline will require that homes whose mutual-benefit rental arrangement has ended be sold within one year to retain the residency-requirement exemption, with a maximum deadline of the end of 2029. Homes whose mutual-benefit rental arrangement ends by the end of this year must be sold by the end of 2027.

Tax support for unsold completed housing outside Greater Seoul will be extended by one year. The deadline for excluding such units from the home count used to calculate comprehensive real estate and capital gains taxes will be extended to Dec. 31, 2027.

The exemptions from the comprehensive real estate tax aggregation and the corporate tax surcharge for unsold completed housing outside Greater Seoul acquired by corporate restructuring real estate investment trusts will be extended through the same date.

Separately, the Korea-US Strategic Investment Fund established under the Korea-US Strategic Investment Corporation will be added to the list of organizations exempt from gift tax, meaning contributions to the fund will not be subject to gift tax.