Income deduction, easy to find

Income deduction, easy to find

Tax deductions refer to amounts deducted from total income. The more deductions, the less “standard tax” is applied, so you can receive more refunds. There is an earned income deduction, a pension income deduction, a retirement income deduction, a comprehensive income deduction, and an income deduction in accordance with Tax Reduction and Exemption Control Act.

 Earned income deduction, pension income deduction,                                         and retirement income deduction

For the earned income deduction, mandatory expenses of income generation are not taxed. The deduction is graduated depending on the total income, but normally 80% of total income is deducted. Certain amounts of pension income are deducted, and retirement income is deducted using the retirement income deduction.

 Comprehensive income deduction

The comprehensive income deduction consists of a personal exemption, the insurance premium deduction and the special deduction. The personal exemption allows taxpayers to deduct certain amounts for personal expenses and the expenses of family member expenses from taxable income. This is in account of the minimum cost of living for every taxpayer. The maximum deduction is 1,500,000 won per person, and varies depending on the type of family members (senior citizens, women, children, adopted children, and the disabled).

National pensions and other insurance premiums are deducted through the insurance premium deduction. Contributions to retirement pensions are deductible up to 4,000,000 won a year.

A special deduction covers expenses for social support not covered by the income deduction. Examples include the medical deduction, the education deduction, the housing deduction, the insurance deduction, and donation expenses.

 Income deduction in accordance with Tax Reduction and Exemption Control Act

In addition, a certain percentage of expenses using credit cards, cash cards, cash receipts, and pension savings are deducted out of total income. The income deduction details change slightly every year, requiring extra vigilance from taxpayers. Other deductions have stayed the same.