Expecting Tax Credits and Return Gifts When Donating... Zero Deduction Benefits?[Hutdari Economy]

If You Aim for a (50) Tax Credit, First Confirm Eligibility Before Donating

Editor's NoteMany people thought it was a smart economic activity that could yield better results, but it often turned out to be a misstep. When deceived by corporate marketing or blinded by momentary gains, making wrong decisions ultimately harms consumers. We aim to examine economic activities where people have made mistakes by misjudging everyday situations.

The Hometown Love Donation Program is gaining attention from the 2030 generation due to its attractive benefits, such as tax credits and points worth up to 30% of the donation amount. However, since the amount of tax credit varies depending on individual income and some may not receive benefits at all, it is important to first check whether you qualify for the tax credit if your purpose is not to contribute to the development of the region.

The Hometown Love Donation Program is a system that encourages individuals to donate to local governments (metropolitan or basic) other than their registered residential address to contribute to regional development. It has been implemented since January 2023 to foster a culture of donation, revitalize the local economy, and promote balanced national development. Local governments use the donation funds to strengthen local finances and support vulnerable groups, youth, cultural, artistic, and health promotion, as well as regional economic revitalization. Donors can feel proud of doing a good deed. At the same time, they receive tax credits and thank-you gifts. The variety of thank-you gifts is substantial, including traditional doenjang (fermented soybean paste), gochujang (red chili paste), 10kg of rice, Korean beef, car camping packages, agricultural, livestock, and marine products, processed foods, daily necessities, tourism and services, and local gift certificates, offering a wide range of choices. Recently, Busan City even offered 'public garden rental rights' as a thank-you gift.

The maximum annual donation amount, which was previously 5 million KRW, has increased to 20 million KRW this year. Donations must be completed by 11:30 PM on December 31 to receive tax benefits during year-end tax settlement. Donations up to 100,000 KRW are eligible for a 100% tax credit. The tax credit rate for the amount exceeding 100,000 KRW is 16.5%. For example, if you donate 500,000 KRW annually, you can receive a tax credit of (100,000 KRW + 400,000 KRW x 16.5%). Additionally, you receive 30% of the donation amount (150,000 KRW) in points to purchase local government thank-you gifts.

Increased app waiting times due to high interest in benefits (left). Return gifts offered by local governments (right). Official website of Hometown Love e-Um.

However, caution is needed as there are cases where donations are made but tax credits are not received. This is because the amount of credit depends on your final tax amount (tax after deducting credits and exemptions). Even if someone donates 100,000 KRW, they may only receive a credit less than 100,000 KRW depending on their final tax amount. If you expect a full refund of all taxes, there will be no tax credit benefit from the Hometown Love Donation.

The 100,000 KRW tax credit portion should not be mistaken for a 'refund.' Misunderstandings can arise from promotional posters stating things like "Donate 100,000 KRW, get 130,000 KRW benefits." The Ministry of the Interior and Safety also introduced the program on its website with the phrase "Donate 100,000 KRW, get 130,000 KRW benefits." Although the phrase "The amount of credit may vary depending on the final tax amount" is stated on the donation confirmation page and notices, it is not very noticeable. A customer service representative at the Hometown Love e-um center said, "We receive many inquiries about tax credits for donations at year-end," and advised, "Since the credit amount may vary depending on individual final tax amounts, it is best to check with the National Tax Service first."

An official from the Ministry of the Interior and Safety said, "It seems that confusion arises due to the promotional wording," and added, "We will provide more repetitive guidance in the future so that site users can accurately understand the information and avoid inconvenience."