Real Estate Tax Myths Are a Joint Creation of Progressives and Conservatives

How much capital-gains tax would President Lee Jae-myung have paid after selling an apartment bought for 366 million won in 1998 and sold for 2.9 billion won? A Dong-A Ilbo column uses that transaction to argue that South Korea’s housing tax system has fostered excessive property gains and distorted public attitudes toward real estate.

Using an 80% long-term ownership deduction and assuming no deductible expenses, the column calculates a maximum South Korean tax of about 101.2 million won, including local tax. It compares that figure with an estimated 307.5 million won in the United States and about 430 million won in Japan. The column says those amounts equal 3.9% of the capital gain in South Korea, 12% in the United States and 16.9% in Japan.

The comparison applies US and Japanese exemptions and rates. In the United States, the calculation assumes joint filing, no other income, a $500,000 home-sale exemption after the required ownership and residence periods, and rates reaching 20%, plus the 3.8% net investment income tax. In Japan, it applies a 30 million yen exemption for a primary home and lower rates for homes held at least 10 years.

The column traces South Korea’s long-term ownership deduction to 1989, when it ranged from 10% after five years to 30% after 10 years. It says the deduction rose to 80% in 2009 under President Lee Myung-bak, after home prices had risen sharply during the Roh Moo-hyun administration. The tax-free threshold later rose from 500 million to 600 million won in the 1990s and 2000s, to 900 million won in 2009 and 1.2 billion won in 2021.

The writer argues that progressive and conservative governments share responsibility. The Moon Jae-in administration divided the 80% deduction between ownership and residence, while the Lee Jae-myung administration plans to remove the ownership portion and shift the full deduction to residence. The column calls this a workaround that could create side effects, including rental shortages.

It advocates reducing and simplifying deductions across single-home owners, multiple-home owners, owners and residents. The column also recalls a proposal from 2000 to defer tax when homeowners used sale proceeds to buy another home of equal or greater value. It argues that this could have protected genuine homebuyers while still allowing authorities to tax capital gains adequately.