[Yoon Administration Tax Law] Credit Card Deduction Extended for 3 More Years... Monthly Rent Tax Credit Rate Up to 15%

2022 Tax Reform Plan

[Asia Economy Sejong=Reporter Son Seon-hee] The government has decided to extend the income deduction for credit card usage, which was scheduled to expire at the end of this year, for an additional three years until the end of 2025. The additional deduction limits applied to categories such as traditional markets and public transportation will be integrated, and support will be expanded by adding movie ticket fees to the deduction targets.

The tax credit rate for monthly rent paid by non-homeowner household heads will also be increased from the existing 12% to 15% to alleviate housing cost burdens.

On the 21st, the Ministry of Economy and Finance announced the '2022 Tax Reform Plan' containing these details. The income deduction for credit card usage applies a 15-40% income deduction on amounts exceeding 25% of total salary. This time, the total salary brackets were reorganized from three to two. For the bracket of 70 million KRW or less, a basic deduction of 3 million KRW applies, and for the bracket exceeding 70 million KRW, 2.5 million KRW applies. The previous bracket for those earning over 120 million KRW was consolidated, increasing the basic deduction for high-income earners from 2 million KRW to 2.5 million KRW. Regarding this, Kwang-Hyo Ko, Director of the Taxation Office, explained, "It is true that the deduction limit for those earning over 120 million KRW has increased, but the change was made to simplify the brackets because the system was complicated. Since income deduction is only applied to amounts exceeding 25% of total salary, high earners find it difficult to receive full deduction benefits, so the system was simplified."

Among credit card usage amounts, additional deductions of 1 million KRW each are provided for traditional markets, public transportation, and books/performances. In this reform plan, for the bracket of 70 million KRW or less, these have been integrated. In other words, regardless of category, the usage amounts are combined to allow a maximum deduction of 3 million KRW. Considering the sharply rising fuel prices due to international oil prices, the income deduction rate for public transportation usage in the second half of this year was significantly increased from 40% to 80%.

The government also expanded the asset eligibility for the Earned Income Tax Credit and Child Tax Credit for low-income households from "less than 200 million KRW" to "less than 240 million KRW." The maximum payment amount was increased by about 10%, and the child tax credit was raised by 100,000 KRW per child to 800,000 KRW.

The tax credit rate for monthly rent paid by non-homeowner household heads was raised from 12% to 15% for total salaries of 55 million KRW or less, and from 10% to 12% for the bracket between 55 million and 70 million KRW. The income deduction limit for principal and interest repayments on housing lease deposits such as jeonse and monthly rent deposits will also be expanded from 3 million KRW to 4 million KRW annually.

University entrance exam fees and the College Scholastic Ability Test (CSAT) fees will be added to the education expense tax credit (15%) targets, and value-added tax on diapers and baby formula will be permanently exempted. Additionally, families with multiple children (three or more children under 18) will be exempt from individual consumption tax up to 3 million KRW when purchasing passenger cars.

The individual consumption tax reduction system for eco-friendly vehicles (hybrid, electric, hydrogen cars) has been extended for an additional two years.