From This Year's Year-End Tax Settlement, Increased Deduction Rates for 'Credit Card Public Transportation and Cultural Expenses' and Tax Credit for 'University Entrance Examination Fees'

Year-End Tax Adjustment Simplification Service Opens on the 15th... Final Data Available for Review from the 20th
Check Expanded Deductions and Exemptions for This Year

Starting from this year's year-end tax settlement, the deduction rate for public transportation expenses paid by credit card will increase from 40% to 80%. The deduction rate for cultural expenses such as books and movie tickets will also be raised to 40%. The fees for the College Scholastic Ability Test (CSAT) and university entrance examination will be included in education expenses and eligible for tax credits. The income tax reduction limit for employees of small and medium-sized enterprises has been raised to 2 million KRW per year.

The National Tax Service (NTS) announced on the 15th that it has launched the simplified year-end tax settlement service.

The NTS will provide a total of 41 types of proof documents for the first time this year, including hometown love donations, movie tickets, employment insurance premiums, CSAT fees, and university entrance examination fees. Those who have made hometown love donations can receive a full tax credit up to 100,000 KRW, and 15% of the CSAT and university entrance examination fees can be credited as education expenses.

Medical expenses not found in the simplified service can be reported to the reporting center by the 17th of this month. If medical expenses are not found or are incorrect in the simplified data, reporting to the 'Unfound Medical Expenses Reporting Center' between the 15th and 17th will prompt the NTS to guide medical institutions to submit additional or corrected documents. The updated simplified data can be checked on the Hometax simplified service starting from the 20th.

Citizens are waiting for the bus at the Gyeonggi bus stop near Sadang Station in Dongjak-gu, Seoul. Photo by Jinhyung Kang aymsdream@

From this year's year-end tax settlement, the deduction rate for public transportation expenses paid by credit card and others will increase from 40% to 80%, and the deduction rates for cultural expenses and traditional market expenses will each increase by 10 percentage points to 40% and 50%, respectively, for expenditures made after April 1st of last year.

The tax credit limit for pension accounts will be expanded from 4 million KRW (7 million KRW including retirement pensions) to 6 million KRW (9 million KRW), regardless of age, and grandparents will also be eligible to apply child tax credits for their grandchildren.

The monthly rent tax credit amount will also be expanded. The standard market price for eligible housing will be raised from 300 million KRW to 400 million KRW. The deduction limit is 7.5 million KRW, and if the total salary is 70 million KRW or less, the deduction rate will increase from 10% to 15%, and if it is 55 million KRW or less, it will be adjusted from 12% to 17%.

Additionally, CSAT fees and university entrance examination fees will be included in education expenses with a 15% tax credit, and up to 100,000 KRW of hometown love donations can be fully credited with a 15% tax credit up to 5 million KRW. The income tax reduction limit for employees of small and medium-sized enterprises has been raised from 1.5 million KRW to 2 million KRW per year.

According to the NTS, in the 2022 year-end tax settlement results, 8 out of 10 workers received tax refunds, while 2 paid additional taxes. The most common income deduction items were credit card and other income deductions, mortgage interest payments, and principal and interest repayments on housing lease loans, in that order. Tax credits were mainly for donations, insurance premiums for protection, and medical expenses. The item with the highest growth rate was the monthly rent tax credit, which increased by about 62%.