Year-End Tax Adjustment Mistakes Highlighted by the National Tax Service

■ "Excessive deductions lead to heavy penalties" Paying more taxes if deductions are incorrect

■ "Only one parent can claim the basic deduction" Caution for dual-income couples and siblings

■ "Basic deduction not allowed for dependents with income exceeding 1 million won"

■ "Spouse who earned 2 million won from selling land excluded from basic deduction"

■ "Exclude medical expenses reimbursed by indemnity insurance"

Dependents whose annual income exceeds 1 million won in 2025 are not eligible for the basic deduction. In addition, only one person among dual-income couples or siblings can claim the basic deduction for their parents, so extra caution is required.

The National Tax Service provided guidance on January 23 regarding common mistakes made in each deduction and exemption category during the year-end tax adjustment process.

An official from the National Tax Service explained, "If you claim excessive deductions without accurately checking the requirements, you may have to report and pay additional taxes," adding, "You may also be subject to penalty taxes, so it is important to thoroughly verify the deduction requirements in advance."

First, you should double-check the income requirements for dependents. If a dependent’s income exceeded 1 million won last year (or 5 million won in total salary if only wage income), the basic deduction cannot be claimed. Also, make sure that parents are not claimed for the basic deduction by more than one person among dual-income couples or siblings. For example, if a spouse earned 2 million won in capital gains from selling land last year, they are not eligible for the basic deduction. If both a brother and a sister report their father as a dependent for the basic deduction, only one person can claim it after filing an amended return. Dependents who exceed the income threshold are not only ineligible for additional deductions such as for seniors or persons with disabilities, but also cannot claim deductions for credit card spending, insurance premiums, educational expenses, or donations.

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For the monthly rent tax credit, you must verify home ownership and resident registration status. If, as of December 31 of last year, you or your household owned at least one home, or if you did not register your address at the rented property so that your resident registration address does not match the address on the lease contract, you cannot claim the monthly rent tax credit. In addition, if you do not actually reside in the rented property, you are not eligible for the tax credit, regardless of whether you paid rent.

Only the amount of medical expenses actually paid by the employee can be deducted. If you received reimbursement from indemnity health insurance or were refunded under the medical expense cap system, the reimbursed amount must be excluded from the deductible medical expenses. However, if you file an amended return for the medical expense tax credit after receiving a refund under the medical expense cap system following the year-end tax adjustment, penalty taxes will not be imposed.

An official from the National Tax Service stated, "The National Tax Service analyzes year-end tax adjustment and comprehensive income tax filings to check employees suspected of excessive deductions. In fact, last year, we reviewed 80,000 cases," adding, "We hope you pay attention to the types of mistakes we have highlighted so you can avoid inconvenience caused by excessive deductions during the year-end tax adjustment."