"Divorced Families, Who Receives the Child Tax Credit?"... National Tax Service, Earned Income and Child Tax Credit Q&A

National Tax Service Sends Regular Application Notices for Earned Income and Child Tax Credits
Applications Accepted Until the 31st

The National Tax Service (NTS) released the 'Confusing Earned Income and Child Tax Credit Q&A' on the 13th to help applicants understand the eligibility criteria ahead of the regular application period for the Earned Income and Child Tax Credit.

The NTS sent application guides for the Earned Income and Child Tax Credit to 3.9 million households with earned income, business income, or clergy income in 2023, and has been accepting applications from the 1st to the 31st of this month.

Applications submitted by the 31st will be reviewed for eligibility and payments are scheduled for the end of August. Applications submitted within six months after the deadline will receive a 5% reduction in the credit amount.

Below is the 'Confusing Earned Income and Child Tax Credit Q&A' provided by the NTS to help understand the eligibility criteria.

- In a divorced family, who receives the child tax credit?

▲ The person living with the child can apply. However, if there is a person agreed upon by both parties, that person can apply.

- If the child attends daycare and receives childcare fee support, can the child tax credit be applied for?

▲ You can apply even if you receive childcare fee support under the Infant and Child Care Act.

- How many children can the child tax credit be received for?

▲ You can receive it for all children under 18 years old (with income less than 1 million KRW). Also, if a child living together is severely disabled (income less than 1 million KRW), the credit can be received regardless of age, even if over 18.

- My income slightly exceeds 40 million KRW; can I apply for the child tax credit?

▲ From income earned in 2023, the income threshold for the child tax credit has been raised from under 40 million KRW combined for couples to under 70 million KRW combined, so you can apply. Additionally, the maximum payment amount has increased from 800,000 KRW to 1,000,000 KRW per child.

- I received a child tax credit during year-end tax settlement (or comprehensive income tax final return); can I still apply for the child tax credit?

▲ You cannot receive both the child tax credit and the child tax deduction (150,000 to 300,000 KRW per child) simultaneously. When the child tax credit is paid, the amount of the child tax deduction received will be deducted from the payment.

- Can a child born this year apply for the child tax credit?

▲ Eligibility is determined based on December 31, 2023, so children born in 2024 cannot apply.

- I worked participating in the Senior Employment Program; can I apply for the credit?

▲ Income from the Senior Employment Program is considered earned income, so you can apply.

- Can farmers and fishermen apply for the credit?

▲ Income from farming and fishing is considered business income, so you can apply. However, non-taxable income is excluded, and you must file a comprehensive income tax return for income earned with business registration to receive the credit.

- Can substitute drivers apply?

▲ If you had business registration before December 31, 2023, and filed a comprehensive income tax return for the income earned, you can receive the credit. However, if tax was withheld at source (3.3%), you can receive the credit by filing a comprehensive income tax return even without business registration.

- Can pension income earners apply?

▲ If you only have pension income, you cannot apply. However, if you have earned income, business income, or clergy income and your combined income meets the eligibility criteria, you can apply.

- Can I apply if I have no income at all?

▲ The credit is paid to encourage work, so if you have no income at all, you cannot apply.

- I own a 150 million KRW cargo truck and live in a rented house with a deposit of 100 million KRW; can I not apply due to exceeding the asset threshold (under 240 million KRW)?

▲ When assessing the asset threshold, only non-business passenger cars are included in the asset value. Cargo trucks or business passenger cars (taxis, rental cars, etc.) are not included.

- Are debts deducted when assessing the asset threshold (under 240 million KRW)?

▲ Debts are not deducted.

- Does everyone who received the application guide qualify for the credit?

▲ Most receive the credit as applied, but some may have their credit reduced or excluded due to exceeding the asset threshold after financial asset verification.

- What assets are combined when assessing the asset threshold?

▲ As of June 1, 2023, the combined value of land and buildings (including houses), passenger cars, rental deposits, financial assets, memberships, securities, and rights to acquire real estate owned by the applicant and household members are summed.

- Can foreigners apply for the credit?

▲ Foreigners cannot apply. However, those married to a Korean national or those with dependent children who have Korean nationality can apply.

- I also work, so why was the guide sent only to my father?

▲ The credit is paid per household, so only one person per household can apply. If there are two or more income earners in the household, the applicant is determined in order of highest total salary, highest credit amount, or previous year's applicant. However, if there is an agreed person, that person has priority.