The medical expense credit is usually explained as "15% of whatever exceeds 3% of your pay". The statute does not say that. It splits medical bills into four paragraphs and applies the 3% floor to them in order — and because of that order, the same money can give a different answer.
1. The floor is taken once — not 3% from each paragraph.
2. But the order is fixed. Whatever paragraph 1 leaves unfilled carries into paragraph 2, then 3, then 4.
3. The 7m won cap sits on paragraph 1 only. Self, over-65s and the disabled have no cap.
4. There are three rates: 15% ordinarily, 20% for premature and congenital cases, 30% for fertility treatment.
Enter gross pay and three figures and it shows exactly where the floor is absorbed.
It follows the order the statute sets. Article 59-4(2) splits medical bills into four paragraphs and applies the floor of 3% of gross pay to them in order — each proviso reads "where the bills under the preceding paragraph fall short of 3%, the shortfall shall be subtracted". So the floor is taken once in total. The annual cap of 7m won sits on paragraph 1 only; paragraph 2 (self, under-6s, over-65s, the disabled and the seriously ill) has no cap. The rates are 15% for paragraphs 1 and 2, 20% for paragraph 3 (premature and congenital cases) and 30% for paragraph 4 (fertility treatment). There is no separate field for paragraph 3 — enter it in the paragraph 2 field and read the rate as 20%. The Decree's own sub-caps (500,000 won per person for glasses and lenses, 2m won for postnatal care) and the deduction of insurance reimbursements are not included. An estimate.
The floor is used up one paragraph at a time
Each paragraph of article 59-4(2) carries the same shape of proviso.
Para. 2 … provided that where the medical expenses under paragraph 1 fall short of 3% of gross pay, the shortfall shall be subtracted.
Para. 3 … provided that where the sum of paragraphs 1 and 2 falls short … the shortfall shall be subtracted.
Para. 4 … provided that where the sum of paragraphs 1 to 3 falls short … the shortfall shall be subtracted.
Read together, they mean whatever the earlier paragraph could not absorb, the next one absorbs. So the floor comes off once in total — it only moves.
On 40m won of pay the floor is 1.2m won. With only 500,000 won in paragraph 1 the floor is not filled, so the remaining 700,000 won carries into paragraph 2 — of its 2m won, only 1.3m won counts, and by paragraph 4 the floor is exhausted so the whole amount counts.
The 7m won cap sits on paragraph 1 only
This is where the difference gets large. Only paragraph 1 carries the proviso "where that amount exceeds 7m won a year, it shall be 7m won". Paragraph 2 has no such sentence.
| Para. | Whose bills |
|---|---|
| 1 7m won cap | any other dependant spouse, family aged 7 to 64, and so on |
| 2 no cap | yourself, anyone aged 6 or under at the start of the year, anyone 65 or over at the end of it, the disabled, and those with serious, rare or tubercular illness |
| 3 20% | premature babies and congenital conditions |
| 4 30% | fertility treatment, related medicines included |
| Income Tax Act art. 59-4(2). Neither age nor income limits apply here — the age and income tests for dependants do not reach medical expenses. | |
The same 10m won is cut at 7m won in paragraph 1, losing 1.8m won (a credit of 1.05m won), but counts in full in paragraph 2 (1.32m won). 270,000 won apart.
A parent aged 65 or over falls in paragraph 2. That age test runs to the end of the tax year — 31 December. But "aged 6 or under" runs to the start of it — 1 January. The two reference dates differ.
Three rates, one floor
That fertility treatment attracts 30% is fairly well known. That the floor in front of it is still a single one is less so. Paragraph 4's proviso subtracts only what paragraphs 1 to 3 left unfilled — so where other bills have already filled the floor, fertility costs are credited in full at 30%.
Education caps differ by person
That is paragraph 3. The rate is 15% throughout and there is no floor — unlike medical expenses.
| Who | Cap |
|---|---|
| Yourself para. 3(2) | no cap graduate school and student-loan repayments included |
| A child at university para. 3(1) | 9m won each graduate school excluded |
| School and pre-school para. 3(1) | 3m won each |
| Disability special education para. 3(3) | no cap |
| Income Tax Act art. 59-4(3). Graduate fees count for yourself only — paragraph 1 excludes "education expenses paid to a graduate school". | |
Protection-type insurance premiums (paragraph 1) are credited at 12%, or 15% for disability-only cover, each capped at 1m won — separately, not combined.
Questions that remain
What if insurance reimbursed some of it?
Subtract it before entering. The Decree excludes indemnity medical insurance proceeds from medical expenses. This calculator assumes the figures you enter are already net of them.
Do glasses count?
Corrective glasses and contact lenses count up to 500,000 won per person per year. That is a sub-cap set by the Decree and is not built into the calculator — if you spent more, enter 500,000.
Which sibling claims a parent's bills?
Whoever claims the basic allowance for them. But because medical expenses are free of the age and income tests, a parent who fails the income test for the allowance can still have their bills claimed if you share a household. The two tests are not the same.
Why a credit rather than a deduction?
It changed in 2014. A deduction comes off the tax base; a credit comes off the tax itself. So a credit returns the same amount whatever your marginal rate.
What does this calculator leave out?
A dedicated field for paragraph 3, the Decree's sub-caps for glasses and postnatal care, the deduction of insurance reimbursements, and the fact that credits above the gross tax are treated as nil. That last one is handled by the year-end settlement calculator.
Sources
Income Tax Act [in force 1 January 2026] [Act No. 21221] — art. 59-4(2) (medical expenses), (3) (education), (1) (protection-type insurance).
The point of this article — that the floor moves paragraph by paragraph — comes from three provisos, one each on paragraphs 2, 3 and 4: "where the sum under the preceding paragraphs falls short, the shortfall shall be subtracted". Reading the main text alone, it is easy to miss.
The script was checked against the same model across 1,365 combinations — 7 pay figures x 13 paragraph-1 figures x 5 paragraph-2 figures x 3 fertility figures, all matching, with the floor and the 7m won cap tested one won either side.
Where to check
What does and does not qualify is set out in the medical and education credit guide. Put the figure from here into the "other credits" field of the year-end settlement calculator to see how far it moves the tax. Dependants are in personal allowances, and the 25% card threshold in the card deduction calculator.
