President Lee: "'Abolishing the Long-Term Ownership Deduction Means a Tax Bomb for Single-Home Owners' Is False Agitation"...Suggests Gradual Abolition

On April 18, President Lee Jaemyung refuted controversy over the abolition of the Long-Term Holding Special Deduction (Jangtuk Deduction) for capital gains tax, stating, "The claim that abolishing the deduction would impose a tax bomb on ordinary citizens who own and live in a single home is a logical contradiction and a clear case of false agitation."

Yonhap News Agency

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On the same day, President Lee posted a direct rebuttal on X (formerly Twitter), attaching an article that suggested abolishing the deduction could increase the tax burden for single-home owners.

President Lee defined the Jangtuk Deduction as "a system that significantly reduces capital gains tax simply for holding property long-term, regardless of whether it is actually used as a residence." He added, "There is a separate system that reduces capital gains tax for long-term residency." He continued, "When someone buys a home not to live in but to profit from rising prices, it is only fair that they pay taxes on the gains. Why should the tax be heavily reduced just because the property was held for a long time? Unless one is defending real estate speculation, there is no reason to argue for capital gains tax reductions solely based on long-term ownership."

He further argued, "If a diligent worker earns over 1 billion won in employment income in a year, nearly half is paid in taxes. Yet, for real estate speculation, even if windfall gains amount to tens or hundreds of billions of won, taxes are massively reduced just because the property was held for a long time. This runs counter to both justice and common sense."

The separate system mentioned by President Lee is interpreted as referring to the current tax law's special provision for long-term holding of a single home per household. While the general Jangtuk Deduction is based solely on the holding period, the special provision for single-home owners requires at least two years of residency during the holding period, allowing deductions of up to 80% by reflecting both the holding and residency periods.

President Lee also rebutted concerns that abolishing the deduction could lead to a freeze in property listings, saying, "If it were abolished suddenly and completely, that could happen, but if the abolition is gradual and phased, giving people time to sell, the issue could be resolved." He proposed examples such as a six-month grace period followed by a partial (half) abolition for six months, and then complete abolition one year later, adding, "If selling sooner is more advantageous, this will encourage listings, not lock them up." He also mentioned the necessity of completely blocking loans for investment and speculative real estate, as well as strictly recovering existing loans.

President Lee indicated his intent to pursue a legislative amendment, not just an executive order. He stated, "If the abolition of the deduction is stipulated by law, it cannot be easily reinstated by a future administration, making it meaningless to wait it out. If we exclude legitimately held homes-such as single residences for actual living or homes temporarily left vacant due to work-from the stricter property holding burden for investment and speculative real estate, bringing it to the level of advanced countries, then the longer one holds such properties, the greater the loss will be."

On April 8, Assemblyman Yoon Jongoh of the Progressive Party sponsored a revision to the Income Tax Act to abolish the Long-Term Holding Special Deduction while introducing a lifetime capital gains tax deduction of up to 200 million won for those transferring homes held for at least three years. This bill was co-sponsored by Assemblyman Lee Gwanghee and Assemblywoman Lee Juhee of the Democratic Party of Korea, among others.

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