[Year-End Tax Settlement Preview] Starting October 30... Significant Increase in Credit Card Income Deduction Rates and Limits

[Asia Economy Reporter Kwangho Lee] On the 30th, the National Tax Service announced the launch of the 'Year-end Tax Settlement Preview' service to help employees establish tax-saving plans for their year-end tax settlement.

First, the preview service can only be accessed by logging into the National Tax Service Hometax website using a certified digital certificate.

The preview service allows users to modify deduction items filled with last year's amounts to the expected usage amounts for this year, and it calculates the year-end tax settlement amount in advance. Users can also receive tax-saving tips for each item, as well as data on the past three years' filing details, trends in burden increase or decrease, and actual tax burden rates.

After checking the amounts used from January to September for credit cards, debit cards, prepaid cards, cash receipts, traditional market usage, and public transportation usage collected from credit card companies, users can input the expected usage amounts for October to December and total salary. The service then calculates the expected income deduction amount and the reduced tax amount, considering the minimum usage amount and deduction rates by payment method.

Credit card income deductions apply to the portion exceeding 25% of the total salary. This year, due to the impact of COVID-19, the government raised the credit card income deduction rates and limits.

The deduction rates are as follows: for credit cards, 15% for January to February, 30% for March, 80% for April to July, and 15% for August to December. For debit, prepaid, and cash receipts, the rates are 30% for January to February, 60% for March, 80% for April to July, and 30% for August to December. For public transportation and traditional markets, the rates are 40% for January to February, 80% for March, 80% for April to July, and 40% for August to December. For those with total salaries of 70 million KRW or less, expenditures on books, performances, museums, and art galleries are deductible at 30% for January to February, 60% for March, 80% for April to July, and 30% for August to December.

The credit card income deduction limits have been raised to 3.3 million KRW for those earning 70 million KRW or less, 2.8 million KRW for those earning between 70 million and 120 million KRW, and 2.3 million KRW for those earning over 120 million KRW.

For an employee with a total salary of 40 million KRW who used credit cards for 1 million KRW each month, the 2020 credit card income deduction amount will be 1.6 million KRW, an increase of 1.3 million KRW compared to last year.

A National Tax Service official stated, "We will continue to improve taxpayer services to minimize the inconvenience of employees having to issue documents themselves by expanding the collection of simplified data, enabling easy year-end tax settlement."