The application period for the year-end tax settlement, known as the ‘13th-month salary’, is approaching. Since the 5th, the National Tax Service has opened the ‘Year-end Tax Settlement Preview’ service on Hometax for 20 million wage earners. Using credit·debit card spending from January∼September this year and last year year-end settlement filing data, taxpayers can simulate the amount of tax to be refunded.

The National Tax Service also provides tailored guidance to 520,000 office workers who have no history of year-end settlement deductions but are likely to be eligible based on big data analysis. This year, the number of people to be guided on the monthly rent tax credit for those without a home will be expanded from 80,000 to 150,000. The National Tax Service shares customized ‘hot tips’ as well. We gathered questions that taxpayers may have.

Employees can receive income deductions on credit·debit card payment amounts and cash-receipted amounts that exceed 25% of total salary. The deduction rates are 15% for credit card use and 30% for debit card and cash-receipted amounts. The basic deduction limit is 3 million won for workers with total salary of 70 million won or less, and 2.5 million won for those above 70 million won.

Therefore, employees benefit by using credit cards up to 25% of total salary, and for the amount exceeding 25% of annual pay, by paying with a debit card or obtaining cash receipts. This is because spending up to 25% of total salary is excluded from the deduction, and for the excess, the deduction rate is higher when using a debit card or cash.

Spending on culture and sports such as gym·movie theater use and book·newspaper purchases is deductible at 30%, and public transportation·traditional market spending at 40%. However, the culture·sports income deduction applies only to workers with total salary of 70 million won or less.

The Hometown Love Donation program allows individuals to receive a tax credit at year-end settlement when they donate to a region other than their registered address. Typically, if you donate 100,000 won, you get back 130,000 won in value. You receive 100,000 won back as a tax credit and can receive a 30,000 won return gift.

For the portion exceeding 100,000 won, a 15% tax credit (16.5% including local tax) applies. If you donate to a specially declared disaster area (donations within three months of the declaration), the portion exceeding 100,000 won receives a 30% special tax credit (33% including local tax).

You do not have to donate to your actual hometown. Because return gifts differ by region, you can choose where to donate based on the gift you want. Return gifts can be checked on the Hometown Love e-eum website.

Employee A with an annual salary of 50 million won has an installment savings of 5 million won that matures at the end of this month. Is there a way to keep the lump sum and also use it for tax savings?

If A deposits 5 million won into a pension savings account, they can receive a 750,000 won tax credit at year-end settlement. If the same amount is put into a Comprehensive Housing Subscription Savings account, the deduction is 180,000 won; if contributed to the Youth Long-term Collective Investment Securities Savings (Youth Fund), the deduction is 300,000 won. The ‘Youth Fund’ is a financial product with income deduction benefits available to young workers aged 19 to 34 whose total salary is 50 million won or less. The annual contribution limit is 6 million won.

However, note that if the Comprehensive Housing Subscription Savings is terminated within 5 years from enrollment or the Youth Fund within 3 years, the tax benefits are lost and additional tax may be imposed.

Here are some systems that are changing. From this year, the spouse of a head of household without a home and with total salary of 70 million won or less can also receive the housing purchase savings income deduction. Previously, only the head of household could do so, but eligibility has been expanded to the spouse of a head of household without a home. Also from this year, the child tax credit amount has increased by 100,000 won. The deduction is 250,000 won for one child, 300,000 won for two children, and 400,000 won for three or more children.

The National Tax Service sent customized year-end settlement guidance via KakaoTalk on the 6th to some recipients. If it was not delivered, a second notice will be sent via Naver e-document. Guidance is not provided by text message (SMS) or phone call, so please beware of phishing·smishing impersonating the National Tax Service.