[Ki Ha-young's Life Card] 13th Month Salary vs Taxes, Check Additional Credit Card Deductions

Consumption Up 5%↑ Additional 10% Deduction on Increase... Up to 1 Million KRW
Process Simplified... National Tax Service Provides Bulk to Companies

Is there anyone these days without at least one credit card? In modern society, anyone can have a card if they want. Credit cards have brought unparalleled convenience to daily life. Now, wherever you go, you can easily see people paying with credit cards or smartphones. As demand has increased, cards with various benefits are being released almost daily. Accordingly, Asia Economy delivers diverse stories related to cards, which are inseparable from our consumer life, through the weekly 'Cards in Daily Life' corner, including introductions of new cards, industry behind-the-scenes, and guides for card beginners.

The year-end tax settlement season, which can be like a '13th month salary,' is just a month away. The year-end tax settlement can be done starting January 20 next year. Since December, the last month for settlement, is approaching, how about reviewing this year’s spending and wrapping up the year?

If your spending exceeds 5% of last year’s amount... up to an additional 1 million KRW deduction

This year, due to tax law revisions, you can receive an additional deduction for increased spending. If your credit card and other consumption amounts this year exceed 5% of last year’s (2020) usage, you can get an income deduction applying 10% of the increased amount plus an additional limit of 1 million KRW.

Accordingly, if your total salary is 70 million KRW or less, the deduction limit is up to 4 million KRW; if your total salary is over 70 million KRW up to 120 million KRW, it is 3.5 million KRW; and if your total salary exceeds 120 million KRW, you can receive up to 3 million KRW in income deductions. The basic deduction rates are 15% for credit cards, 30% for cash receipts and check cards, 30% for books, performances, and art galleries, and 40% for traditional markets and public transportation.

For example, if Mr. A has a total salary of 70 million KRW and used credit cards for 20 million KRW in 2020 and 35 million KRW in 2021, the amount he can receive as a credit card income deduction increases to 4 million KRW.

Specifically, until last year, the income deduction amount was 2,625,000 KRW, which is 15% of the amount spent exceeding 25% of total salary (17.5 million KRW). This year, you can additionally deduct 10% (1.4 million KRW) of the amount exceeding 105% of last year’s usage (21 million KRW) from this year’s usage (35 million KRW). Adding these together results in 4,025,000 KRW in income deductions, but since the deduction limit for a total salary of 70 million KRW or less is 4 million KRW, the final income deduction Mr. A can receive this year is 4 million KRW.

Claim additional deductions for traditional markets and public transportation... overlapping deductions for medical and academy expenses paid by card

However, if your credit card usage this year does not meet the minimum usage amount (25% of total salary), you cannot receive an income deduction. Therefore, the first thing to check for year-end tax settlement is your spending amount this year. The National Tax Service provides a year-end tax settlement preview service through Hometax. Using the preview service, you can check your card usage from January to September.

For example, if your annual salary is 40 million KRW, you must spend at least 10 million KRW (25% of salary) on cards to qualify for income deductions. If your card usage is far below 25%, there is no need to worry about using cards for tax savings. The same applies if you have already exceeded the maximum deduction limit this year.

Spending on traditional markets, public transportation, books, performances, museums, and art galleries can be deducted up to 1 million KRW each regardless of the deduction limit, so don’t forget to claim these. Also, if you pay medical expenses and academy fees or school uniform purchases for preschool children by credit card, you can receive overlapping deductions for medical and education tax credits as well as credit card income deductions.

Meanwhile, starting this year, the 'Simplified Data Bulk Provision Service' has been introduced, where the National Tax Service directly provides year-end tax settlement data to companies. If employees consent, the National Tax Service will directly provide simplified data including dependents to the company, making next year’s year-end tax settlement process more convenient.

This content was produced with the assistance of AI translation services.