[AldonSseulJob] The Approaching Year-End Tax Settlement Season... Sweet Tips to Receive Your 13th Month Salary

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Did you know that you can pay less tax on your year-end tax settlement depending on your strategy?

Some years, it really feels like a 13th-month salary coming back to you,

while other years, you might even have to pay more tax.

And even with the same salary, some people get refunds while others pay more.

Let's take a look at how year-end tax settlement is applied,

and how you can pay less and get more back.

What is the 13th-month salary, Year-end Tax Settlement?

Do you know what year-end tax settlement means?

For office workers, you probably know that taxes are regularly deducted from your salary,

and

year-end tax settlement is the process of comparing the taxes withheld from your salary over the year with the 'actual tax you owe' and settling the difference.

If you have paid 1.5 million KRW in taxes so far, but the actual tax you owe is 1 million KRW, you get a refund of 500,000 KRW.

Conversely, if you have only paid 1 million KRW but owe 1.5 million KRW, you have to pay an additional 500,000 KRW.

The reason for this somewhat cumbersome recalculation is that even with the same income, each person's situation differs, so taxes are collected considering these differences.

For example, if Mr. A and Mr. B have the same salary, but Mr. A is a single-income earner raising three children, and Mr. B is a single-person household, it makes sense to withhold more tax from Mr. B.

Can you pay less tax with year-end tax settlement?

First, to pay less tax through year-end tax settlement,

you need to understand how the process works.

The key points are 'income deduction' and 'tax credit'.

The year-end tax settlement process is

① Total salary - Income deduction

② Tax base X Tax rate

③ Calculated tax - Tax credit

④ Final tax amount

In other words, this is how the actual tax you owe is calculated.

Since we cannot control the salary amount or tax base,

the key is to make good use of 'income deductions' and 'tax credits.'

By subtracting income deductions from the total salary in step ①, you get the tax base.

The tax base is the standard for taxation,

so it is important to maximize income deductions to lower the tax base.

Essential income deduction items include

personal deductions, housing subscription savings deduction, housing fund deduction, and card deductions.

First, personal deductions provide an additional 1.5 million KRW deduction per dependent family member.

Dependents must have an annual income of 1 million KRW or less, or if they have earned income, their total salary must not exceed 5 million KRW.

Additional deductions apply if dependents include seniors aged 70 or older, persons with disabilities, women, or single parents.

If you are a dual-income household, it is advantageous for the higher-income earner to register the dependents.

Secondly, the housing subscription savings deduction allows an income deduction of 40% of the savings amount up to an annual payment limit of 3 million KRW.

If you want to maximize the deduction from your subscription savings account,

think of saving 250,000 KRW per month for 12 months.

However, remember that you must be a homeowner without a house and have a total salary of 70 million KRW or less.

Thirdly, there is the housing fund deduction.

This refers to costs related to buying or renting a house.

Simply put, if you have taken a loan for your jeonse deposit or monthly rent deposit, you can get an income deduction.

This also applies only if you are a homeowner without a house, and the house is 85 square meters or less in exclusive area.

If you have taken a mortgage loan to purchase a house, you can deduct interest paid up to a maximum of 20 million KRW.

However, if the house owner and the loan borrower are different people, even if they are spouses, the income deduction does not apply.

Credit Card vs. Debit Card

Year-end tax settlement also includes card income deductions.

This deducts the amount spent on credit cards, debit cards, and cash receipts over the year from your income.

To qualify for card income deductions, you must have paid more than 25% of your annual total salary using cards.

For example, if an office worker earns 40 million KRW annually, they must have spent more than 10 million KRW on cards and cash receipts combined to receive the deduction benefit.

If they spent 15 million KRW, 5 million KRW would be eligible for deduction.

If your total salary is 70 million KRW or less, you can get up to 3 million KRW, and if it exceeds 70 million KRW, up to 2.5 million KRW.

[Image source=Yonhap News]

Note that debit cards have a higher deduction rate than credit cards.

Credit cards deduct 15% of the amount spent, while debit cards deduct 30%.

Therefore, there is a strategy to maximize deductions:

Use credit cards up to 25% of your annual total salary,

and use debit cards for amounts exceeding 25%.

If you are a dual-income household with low spending, it is advantageous for the lower-income earner, who can more easily exceed 25% of total salary, to make payments.

Be aware that card income deductions are capped at a maximum of 6 million KRW.

On the 15th, when the National Tax Service's 'Year-end Tax Settlement Simplification Service' began, employees at the Jongno Tax Office in Seoul were reviewing the year-end tax settlement guidebook. Starting this year, according to the newly revised tax law, data such as postpartum care center expenses, museum and art gallery admission fees, Zero Pay usage amounts, and KOSDAQ venture investment amounts have been added to the data provided by the Year-end Tax Settlement Simplification Service. Photo by Kim Hyun-min kimhyun81@

I wonder how readers feel about the seasons.

As an economic newspaper reporter interested in investment,

when the cold wind blows, dividend stocks and year-end tax settlement

are the first things that come to mind.

Today, we looked into one of them, year-end tax settlement.

Did you know that with just a little attention, you can get a refund instead of paying more?

However, rather than spending more to get more income deductions, it is best to spend less.

Spend only on what is necessary, but be sure to claim all the deductions you can.

I hope this was useful 'money'-saving information for you today,

and thank you to all readers for reading.

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