[PB Notebook] Burdensome Health Insurance Premiums After Retirement... Exemption Conditions

Employees approaching retirement after a long career face a significant burden from fixed expenses while their income decreases. Therefore, there is as much interest in ways to reduce the burden of health insurance premiums as there is in tax-saving methods for severance pay or pensions. So, what are the ways to reduce the burden of health insurance premiums?

Health insurance premiums are paid by dividing subscribers into workplace subscribers and regional subscribers. Workplace subscribers pay a monthly insurance premium of 3.545% of their earned income per individual, and 7.09% on the amount exceeding 20 million KRW of annual income other than earned income as a monthly income insurance premium. Regional subscribers, excluding workplace subscribers and dependents, must pay premiums based on 7.08% of their income amount and 208.4 KRW per assessment point for real estate and automobile property. However, if one qualifies as a dependent of a workplace subscriber, they can receive health insurance benefits without a separate premium burden, so it is good to understand the requirements in detail.

To maintain dependent status, one must meet three major income requirements and two property requirements. To make this easier to understand, if any one of the following five conditions applies, the dependent status is lost, and the individual is converted to a regional subscriber who must pay health insurance premiums.

First, annual income exceeds 20 million KRW. Annual income here includes ▲interest and dividend income exceeding 10 million KRW per year ▲business income after deducting necessary expenses ▲public pension receipts excluding private pensions from financial companies ▲other income after deducting necessary expenses, while retirement income and capital gains are not included.

Second, taxable business income exceeds zero. However, if the person is a business operator without a business registration certificate excluding housing rental business operators, or a person with disabilities under the Welfare of Disabled Persons Act, a national merit recipient, or a veteran, and does not have a business registration, taxable business income must not exceed 5 million KRW.

Housing rental income is subject to this if taxable income occurs after deducting necessary expenses even if separate taxation is chosen. For housing rental business operators registered with both the district office and tax office without other income, if the annual total rent exceeds 10 million KRW, and for other housing rental business operators, if the annual total rent exceeds 4 million KRW, taxable income arises, resulting in loss of dependent status.

Third, if married, the spouse must meet the first and second income requirements above. In other words, if the spouse does not meet the income requirements, even if the individual meets the income requirements, dependent status is lost. The property requirements differ in that the spouse’s situation does not affect the individual’s dependent qualification.

Fourth, the total property tax base exceeds 900 million KRW. The property tax base is 60% of the publicly announced price for houses and 70% for other land or buildings. If the sum of an individual’s property tax bases exceeds 900 million KRW, dependent status is lost.

Finally, if the total property tax base is between 540 million KRW and 900 million KRW and annual income exceeds 10 million KRW. For property requirements, one may consider lowering the amount below the standard by gifting part of the real estate share to the spouse, but it is advisable to weigh the pros and cons considering acquisition tax or gift tax.

As seen above, the criteria for dependents exempt from health insurance premiums are quite complex, and if dependent status is lost and converted to a regional subscriber who must pay premiums, it is not easy for non-experts to check the burden amount themselves. However, by using the ‘Tax Saver’ service in the Star Banking app and entering your relevant information according to the guidance, you can easily check whether you meet the dependent qualification requirements and the amount of health insurance premiums you must pay if you do not meet the requirements.

Ho-yong Lee, Tax Accountant, KB Kookmin Bank WM Star Advisory Group