Starting with this year’s year-end tax settlement, not only non-homeowner household heads with an annual salary of 70 million Korean won or less but also their spouses can receive a 40% income tax deduction on their housing subscription savings contributions (up to 3 million Korean won per year). Additionally, the child tax credit amount has also increased by 100,000 Korean won per child compared to last year.
◇ Spouses of Non-Homeowners Also Eligible for Housing Subscription Savings Income Deduction
One of the representative changes in deduction items starting with this year’s year-end tax settlement is the expansion of income deductions for housing subscription savings contributions. An income deduction is a system that reduces the taxable income amount, which is the basis for calculating taxes. If the taxable income decreases, the resulting income tax also decreases.
Until last year’s year-end tax settlement, only the household head themselves could receive a 40% income deduction on their housing subscription savings contributions (up to 3 million Korean won per year) if they were a non-homeowner household head with an annual salary (total income) of 70 million Korean won or less, and their spouse could not receive the deduction even if they were a salaried worker. However, starting with this year’s year-end tax settlement, spouses of non-homeowner household heads can also receive income deductions for comprehensive housing subscription savings if they are workers with an annual salary of 70 million Korean won or less. This aims to encourage simultaneous savings by dual-income non-homeowner couples and enhance the housing acquisition capabilities of actual demand households.
For example, if a non-homeowner household head, Mr. A, and his wife, Ms. B, each contributed 300,000 Korean won per month, totaling 3.6 million Korean won, to their housing subscription savings, Mr. A could only receive a 1.2 million Korean won income deduction (40% of 3 million Korean won, the deductible limit out of 3.6 million Korean won) until last year’s settlement. However, starting with this year’s settlement, not only Mr. A but also Ms. B can receive a 1.2 million Korean won income deduction.
◇ Child Tax Credit Increased by 100,000 Korean Won per Child
The child tax credit amount for children aged 8 to 20 has also increased. A tax credit is a deduction method that directly subtracts a certain amount from the already calculated tax. This year’s child tax credit amount has increased by 100,000 Korean won per child compared to last year. The credit for the first child has risen from 150,000 Korean won to 250,000 Korean won, for the second child from 200,000 Korean won to 300,000 Korean won, and for the third child onward, from 300,000 Korean won to 400,000 Korean won per child. In other words, if there is one, two, or three children, the tax credit amounts have increased from 150,000 Korean won, 350,000 Korean won, and 650,000 Korean won to 250,000 Korean won, 550,000 Korean won, and 950,000 Korean won, respectively.
The donation limit for the Hometown Love Donation, which is eligible for a tax credit, has also increased from 5 million Korean won per year to 20 million Korean won per year. Previously, donations up to 100,000 Korean won were fully tax-deductible, and donations exceeding 100,000 Korean won received a 15% tax credit on the excess amount. However, for this year’s year-end tax settlement, donations to special disaster areas designated by the president will have a 30% tax credit rate on the amount exceeding 100,000 Korean won. This is to encourage donations with a higher deduction rate than general regional donations. However, this applies only to donations made within three months from the date of the special disaster area declaration.
The income tax deduction benefits for credit and check card usage have also been expanded. Previously, an additional 30% income deduction was applied to expenses such as books, performances, movie tickets, art galleries, and museum admissions. For this year’s year-end tax settlement, the additional deduction targets now include swimming pool and fitness center usage fees. However, this applies only to payments made by credit card or similar methods by workers with an annual salary of 70 million Korean won or less from July 1st of this year onward. Additionally, newlywed couples who marry this year and complete their marriage registration by the 31st of this month can each receive a marriage tax credit of up to 500,000 Korean won.
