Dependents With Over 1 Million Won in Income Cannot Receive Basic Deduction at Year-End Tax Settlement

National Tax Service Issues Guide on Common Mistakes

Dependent family members whose income in 2025 exceeds 1 million won will not be eligible for the basic deduction. In addition, only one person among dual-income couples or siblings can claim the basic deduction for their parents, so special attention is required.

The National Tax Service provided guidance on January 23 regarding common mistakes for each deduction and exemption category during year-end tax settlement.

An official from the National Tax Service explained, "If you claim excessive deductions without accurately checking the requirements, you may have to report and pay additional taxes," adding, "You may also be subject to additional penalties, so it is important to thoroughly check the deduction requirements in advance."

First, you must re-examine the income requirement for dependent family members. If a dependent’s income last year exceeded 1 million won (or 5 million won in total salary if only wage income is involved), the basic deduction cannot be claimed. Also, you must ensure that parents are not claimed for the basic deduction by more than one person among dual-income couples or siblings. For example, if a spouse earned 2 million won in capital gains last year from selling land, the basic deduction cannot be claimed for that spouse. If both an older and younger sibling report their father as a dependent for the basic deduction, only one can claim it after filing a corrected return. Dependents who exceed the income threshold are not eligible for additional deductions such as for seniors or persons with disabilities, nor can they receive deductions for credit card spending, insurance premiums, education expenses, or charitable donations.

For the monthly rent tax credit, you must verify both home ownership and the moving-in notification. If, as of December 31 last year, the employee’s household owned more than one home, or if the employee failed to file a moving-in notification for the rented home so that the address on the resident registration does not match the address on the lease contract, the monthly rent tax credit cannot be claimed. In addition, if the employee does not actually reside in the rented home, the tax credit for monthly rent cannot be claimed regardless of whether rent was paid.

For medical expenses, only the amount actually spent by the employee is deductible. If you received reimbursement through indemnity health insurance or received a refund under the medical expense cap system, those reimbursed amounts must be excluded from the deductible medical expenses. However, if you file a corrected return to adjust the medical expense deduction due to receiving a refund under the medical expense cap system after the year-end tax settlement, no penalty will be imposed.

An official from the National Tax Service stated, "The National Tax Service analyzes year-end tax settlement and comprehensive income tax return data to review employees suspected of excessive deductions. In fact, last year, we reviewed 80,000 employees," adding, "We hope you pay close attention to the types of mistakes we have highlighted so you can avoid inconvenience from excessive deductions during year-end tax settlement."