The Hometown Love Donation Program provides a tax credit equivalent to the donation amount. However, the limit for the tax credit varies depending on the donation amount. Getty Images Bank

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As the year-end tax settlement season approaches, interest in the Hometown Love Donation Program is surging. Since donors can receive both tax credits and return gifts, the program is being praised as a "reasonable tax-saving strategy." The government is also encouraging participation, emphasizing the expansion of local finances and the revitalization of regional economies.

The Hometown Love Donation Program allows individuals to donate to local governments (with an annual cap of 20 million KRW) and receive both tax credits and return gifts. Local governments can use the donations to enhance resident welfare and stimulate the local economy, while donors can contribute to regional development and enjoy tax benefits-a win-win arrangement. Donations are not limited to one's actual "hometown"; as long as it is not the donor's registered address (both basic and metropolitan), any region can be chosen.

The Ministry of the Interior and Safety first implemented this system in 2023, presenting the expected effects as the expansion of local finances and the revitalization of the regional economy to achieve balanced development. Ministry of the Interior and Safety

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The Ministry of the Interior and Safety first implemented this system in 2023, highlighting the expected effects of expanding local finances and revitalizing regional economies to achieve balanced development. Local governments can provide return gifts of local specialty products within 30% of the donation amount, which not only increases local finances but also boosts local consumption and helps stimulate the regional economy.

According to the Ministry of the Interior and Safety on November 18, in the first year of the program in 2023, the number of donations and the total amount reached 526,000 and 65.06 billion KRW, respectively. Last year, these figures jumped to 774,000 donations and 87.93 billion KRW. By October this year, 466,000 donations totaling 56.87 billion KRW had already been collected, representing a sharp increase of 76.9% and 65.8%, respectively, compared to the same period last year. Given that donations tend to concentrate at the end of the year, the total amount raised this year is expected to far exceed previous years.

Full tax credit up to 100,000 KRW for everyone
Deposit 100,000 KRW and get 100,000 KRW back
16.5% tax credit applies to amounts exceeding 100,000 KRW

Return gifts provided within 30% of the donor's contribution
Donate 100,000 KRW and receive local specialty products worth 30,000 KRW

The Hometown Love Donation Program provides a tax credit equivalent to the donation amount. However, the tax credit limit varies depending on the donation amount. Full tax credit is available for donations up to 100,000 KRW. This means if you donate 100,000 KRW, you will get the entire amount back through your year-end tax settlement. For amounts exceeding 100,000 KRW, a 16.5% tax credit applies to the excess portion.

For example, if you donate 200,000 KRW, you will receive a full tax credit for the first 100,000 KRW, and a 16.5% tax credit (including local tax) for the remaining 100,000 KRW, totaling 116,500 KRW in tax credits. Additionally, since you can receive return gifts worth up to 30% of your donation, a donor who gives 100,000 KRW will receive a return gift worth 30,000 KRW, effectively getting back the entire amount donated plus a 30,000 KRW gift. A donor who gives 200,000 KRW will receive 116,500 KRW back and a 60,000 KRW return gift, enjoying benefits worth a total of 176,500 KRW.

The appeal of the Hometown Love Donation Program lies in the fact that, in addition to tax credits, donors can also receive local specialty products as return gifts. According to a survey conducted by the Ministry of the Interior and Safety from October 14 to 16 last year on reasons for participating in the program, "tax credit benefits" ranked highest at 69.9% (combined first and second choices), followed by return gifts at 48.5% and social contribution through donations at 45.6%.

Each local government competes fiercely to attract donations by offering a diverse range of food, daily necessities, and tourism products
Donation details are automatically reflected in year-end tax settlements

Income tax and local tax can be checked separately in the simplified service
Expanded disaster area deductions are only available within 3 months of the declaration
Only personal expenses are deductible, and carryovers are not allowed, so caution is needed

Some people even choose their donation region based on the available return gifts. As a result, each local government competes to attract donations by offering unique return gifts. These range from agricultural, livestock, and seafood products to processed foods, daily necessities, local gift certificates, and tourism services. Given the "within 30% of the donation amount" rule, there is especially fierce competition to offer attractive 30,000 KRW gifts to the largest group of donors, those giving 100,000 KRW. Among the various items, food products are the most popular.

Donation receipts are automatically issued by local governments, so donors do not need to take any additional steps for their donations to be reflected in their year-end tax settlements. Donation details can be checked through the National Tax Service's simplified year-end tax settlement service. In this service, only the national (income) tax deduction amount is shown, so for a 100,000 KRW donation, 90,909 KRW is deducted from income tax and 9,090 KRW from local income tax.

However, expanded tax credits for special disaster areas are only available if the donation is made within three months of the disaster declaration, so caution is needed. In addition, tax credits only apply to the donor's own expenses. This means that if a spouse or dependent makes a Hometown Love Donation, the tax credit cannot be consolidated under the main donor's name. Furthermore, the tax credit cannot be carried over. For example, if your final tax due is 50,000 KRW and you donate 100,000 KRW, the remaining 50,000 KRW cannot be applied to the next year's tax credit.