What is Real Estate Capital Gains Tax?
Real estate capital gains tax (양도소득세) is a tax imposed on the profit earned from selling property in Korea. It applies to all types of real estate including apartments, houses, land, and commercial properties. The tax is calculated on the capital gain — the difference between the selling price and the acquisition price minus necessary expenses.
Tax rates range from 6% to 45% using a progressive bracket system, with additional surtaxes for multi-house owners in regulated areas. The tax is reported and paid to the district tax office within 2 months of the property transfer date.
1-House Tax Exemption Complete Guide
The 1-house tax exemption is one of the most significant tax benefits for Korean homeowners. If you own only one house and meet the holding and residence requirements, your capital gains are fully tax-exempt up to a selling price of KRW 1.2 billion.
Key requirements:
- Own only one house as a household (1세대1주택)
- Hold the property for at least 2 years
- In regulated areas (조정대상지역): additionally reside for at least 2 years
- Selling price up to KRW 1.2 billion: fully exempt
- Selling price above KRW 1.2 billion: only the proportional gain above 1.2B is taxable
For properties sold above KRW 1.2 billion, the taxable capital gain is calculated as: Capital Gain x (Selling Price - 1.2B) / Selling Price. The long-term holding special deduction can further reduce this taxable amount significantly.
Real Estate Capital Gains Tax Saving Strategies
1. Maximize long-term holding deduction: For 1-house owners, holding for 10+ years and residing for 10+ years yields the maximum 80% deduction — meaning only 20% of your gain is taxable.
2. Meet residence requirements: In regulated areas, the 2-year residence requirement is essential not just for the 1-house exemption, but also for the enhanced long-term holding deduction rates.
3. Document all necessary expenses: Keep receipts for acquisition tax, brokerage fees, renovation costs, and legal fees. These reduce your taxable capital gain directly.