If You Slack Off Because It Seems Easy, You'll Lose Out... Sweet Tips to Make Year-End Tax Settlement Your '13th Month Salary'

The simplified year-end tax settlement service for the 2023 tax year will open on the 15th on Hometax. Year-end tax settlement is the process of reconciling the taxes paid monthly from the salary over the past year with the actual taxes owed. Starting from this year’s year-end tax settlement, there are expanded deduction items and other changes compared to previous years, so to fully enjoy the benefits of the so-called "13th month salary," it is advisable to carefully find the tax relief benefits that suit you.

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Earlier, the National Tax Service announced that from the 2023 tax year year-end settlement, the comprehensive income tax brackets of 6% and 15% will be expanded. The taxable income base is the amount after deducting various income deductions from the total comprehensive income amount. The 6% and 15% brackets have been expanded and adjusted from the previous KRW 12 million or less to KRW 14 million or less, and from KRW 46 million or less to KRW 50 million or less, respectively. On the other hand, the 24% bracket has been narrowed to over KRW 46 million to over KRW 50 million, and it is analyzed that the overall income tax burden for wage earners will decrease compared to the previous year.

The tax credit for monthly rent has also increased. For example, if the deduction limit is KRW 7.5 million and the total salary is KRW 70 million or less, the deduction rate changes from 10% to 15%, and if the total salary is KRW 55 million or less, it is raised from 12% to 17%. The standard market price for eligible housing has also increased from KRW 300 million to KRW 400 million. However, to receive the revised tax credit, the address on the resident registration certificate and the address on the lease contract must be the same.

Income deductions for credit card usage have also been expanded. The deduction rate for cultural expenses such as books, performances, art galleries, and museums has increased from 30% to 40%. Additionally, movie ticket expenses used after July 1, last year, can now be included in the deduction scope. Education expenses now also include the college entrance exam fee and university admission screening fee, allowing a 15% tax credit.

People who use public transportation with credit cards will also receive a significantly increased deduction rate. From this year, the deduction rate for public transportation expenses paid by credit card, etc., has doubled from 40% to 80%.

The tax credit limit for pension accounts has been expanded from KRW 4 million (KRW 7 million including retirement pensions) to KRW 6 million (KRW 9 million), regardless of age. Those with a total salary of KRW 55 million or less can receive a 15% deduction on contributions, while those exceeding this amount can receive a 12% deduction. Grandchildren in grandparent-headed households, who previously could only receive the basic deduction for direct descendants, can now also receive the child tax credit.

Among dependents living together, those who meet income and age requirements can also qualify for deductions. For children, the age for child allowance payment has been expanded to under 7 years old, and the applicable age for child tax credit has changed to 8 years old or older. Furthermore, the more children aged between 8 and 20 years old, the greater the benefit.

For hometown love donations, the full amount up to KRW 100,000 can be deducted, and a 15% tax credit is available for donations up to KRW 5 million. Also, the non-taxable limit for stock option exercise gains of venture companies has been raised from KRW 50 million per year to KRW 200 million (with a maximum limit of KRW 500 million per company).

The average year-end tax refund amount in 2022 was KRW 770,000, an increase of KRW 90,000 compared to the previous year. On the other hand, one in five people paid an average of over KRW 1 million more in taxes. This is typically due to being caught for duplicate deductions and receiving additional penalties. In response, the National Tax Service warned, "Careful application for deduction items is necessary," and cautioned that "excessive deductions may result in paying additional taxes along with penalties."

'Year-end Tax Adjustment Certificate Issuance Service' operated by the Ministry of the Interior and Safety.
[Photo by Ministry of the Interior and Safety]

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Meanwhile, the Ministry of the Interior and Safety announced that from January 15 to February 2, in line with the 2023 tax year year-end settlement schedule, a dedicated window for the "Year-end Tax Settlement Certificate Issuance Service" will be provided on the Government24 website. Through this service, five types of certificates can be conveniently issued: resident registration certificate, basic livelihood security recipient certificate, foreigner registration certificate, disability certificate, and university enrollment certificate. The service will be operated temporarily during the year-end tax settlement period.

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