Korea's year-end tax settlement is filed in February, but the outcome is largely fixed before December arrives. Once the money is spent, there is nothing left to adjust. The trouble is that almost every guide to “what to do before December” ends at one sentence: put spending up to the threshold on a credit card, then switch to a debit card.
1. What does it save. The card-spending relief is an income deduction, not a tax credit — you get back the deducted amount multiplied by your own marginal rate. The rates by payment method are 15% credit card, 30% debit card and cash receipts, 40% traditional market.
2. Where the common advice fails. “Credit card up to the threshold” is only half right. Past the threshold (25% of gross pay), a card swipe does not automatically buy a deduction — and the National Tax Service names ten over-claimed deductions of its own accord.
3. What to do before December. 31 December is the one real deadline, and it belongs to pension accounts. The monthly rent credit turns on a single line: your registered address.
On 3 August 2026 a bill was published that changes year-end settlement in three places. (1) The dependant income test moves from ₩1m to ₩3m (or ₩5m to ₩7.5m of total pay), (2) the monthly rent credit cap rises from ₩10m to ₩12m a year, and (3) card deductions are reworked — the 40% public transport top-up is folded into the base rate with transport support moving to direct spending, while the books/performance/museum top-up loses its income test but the top-up cap falls by ₩1 million. Still a government bill — the 2026 income year settlement, filed in January–February 2027, runs on the current rules below. See our guide to the 2026 tax reform bill.
Which year this is. Every figure here is for income year 2025 (filed in early 2026). The guide for income year 2026 is published at the end of the year, so re-check the amendments then. Items new from 1 July 2025 are marked .
Is the 25% card rule right
The card-spending deduction (Restriction of Special Taxation Act art. 126-2) applies to the amount you spend above 25% of your gross salary. That excess is multiplied by a rate that depends on how you paid, and the result is subtracted from earned income — it is an income deduction, not a tax credit. What you actually get back is that amount times your own marginal rate.
| Payment method | Rate | Note |
|---|---|---|
| Credit card | 15% | Lowest |
| Cash receipt · debit card · prepaid card | 30% | Double the credit card |
| Books · performances · museums · galleries · cinema tickets | 30% | Gross salary 70M won or less only |
| Swimming pool and gym facility fees | 30% | Spending from 1 Jul 2025; gross salary 70M won or less only |
| Traditional markets | 40% | Eligible for the extra cap |
| Public transport | 40% |
None of that is controversial. The point where the popular advice quietly breaks is a different question: which payment method does the 25% floor get subtracted from first? The guide's formula states the order — the floor is absorbed starting from the lowest deduction rate. Credit card (15%) is consumed first, then debit card and cash receipts (30%), and traditional market and transport spending (40%) last.
| Payment mix | Deduction | Difference |
|---|---|---|
| All credit card, 17.5M won | 0.75M won | baseline |
| Credit 12.5M + debit 5M won | 1.5M won | +0.75M won |
| All debit card / cash receipts, 17.5M won | 1.5M won | +0.75M won |
Two things fall out at once.
- The half that is right. Paying for everything on a credit card halves the deduction (1.5M → 0.75M won). “Mix in a debit card” is sound advice.
- The half that is wrong. “Fill the threshold with a credit card” is worth exactly zero in tax. Rows two and three produce an identical deduction. Because the floor is taken out of credit-card spending first, it makes no difference what you paid with inside the threshold.
This is not just a blogger's claim. The Seoul Metropolitan Government's own year-end settlement page says “use a credit card up to 25% of gross salary, and a debit card or cash receipts for spending above that, as this is most advantageous to the worker.” Its rates match the NTS guide exactly — but it never explains why it is more advantageous. Running the formula shows there is no tax difference to explain. (That page was posted in December 2019, so its caps are dated; only its rates and its wording are used here.)
So why did the strategy spread? Because the downside is also zero. If the tax is the same either way, you may as well put the below-threshold spending on the card that pays points, miles and interest-free instalments. The real basis for the advice was never tax — it was card rewards. The advice survives; its reason changes. Where your own threshold sits, and how much of it is left, is in the card deduction calculator.
There are two layers of cap
| Cap | Gross salary ≤ 70M won | Gross salary > 70M won |
|---|---|---|
| Base cap | 3M won | 2.5M won |
| Extra cap markets · transport · culture and sport | 3M won / year | 2M won / year |
Even after the base cap is exhausted, traditional-market, public-transport and culture-and-sport spending is deducted again under a separate extra cap. That is why chasing those categories genuinely pays off if your gross salary is 70M won or less.
Does every card swipe count
You can get the rates perfectly right and still lose, because some spending never enters the eligible total at all. In practice this catches more people than the rate question. The guide's exclusion list:
| Excluded | Note |
|---|---|
| Buying a car | For a used car, only 10% of the price counts |
| Car lease payments | Fully excluded |
| Insurance premiums and mutual-aid contributions | Fully excluded |
| Education expenses | Excluded, including daycare tuition |
| Utilities and public charges | Apartment maintenance fees, electricity, water, gas, telecoms, TV licence, road tolls |
| Gift certificates and other securities | Fully excluded |
| Property subject to acquisition or registration tax | Real estate, vehicles |
| Duty-free purchases | Duty-free shops |
| Rent already claimed as a monthly-rent tax credit | See the rent section below |
Utilities and insurance dropping out wholesale is the big one. It explains most of the gap people find every year between what their card statement says and what Hometax counts as “card spending”.
Whose cards can you add to yours
- Spending by your spouse and lineal ascendants or descendants (parents, grandparents, children, grandchildren) can be combined — provided that person's annual income is 1 million won or less.
- A sibling's card cannot be combined — even a sibling you legitimately claim as a dependant. The personal deduction and the card deduction are separate tests. Getting this wrong appears on the NTS's own list of over-claimed deductions.
The age and income tests for the personal deduction itself are tabulated in the dependent deduction guide.
What is the one real 31 December deadline
Card spending is mostly a matter of settling money already spent. A pension savings account or IRP, funded by 31 December, is close to the only item that still changes the outcome in the last weeks of the year.
| Band | Test | Credit rate |
|---|---|---|
| Standard | Above the threshold below | 12% |
| Enhanced | Aggregate income 45M won or less wage income only: gross salary 55M won or less | 15% |
The contribution ceiling is 6M won for pension savings and 9M won including an IRP. Two extra routes exist: rolling a matured ISA into a pension account earns a further credit of 10% of the transferred amount (capped at 3M won), and contributions that exceeded last year's ceiling can be converted into this year's and claimed. Because a pension account gives tax back on the way in and takes it back on the way out, read the pension savings and IRP guide before topping up.
What decides the monthly rent credit
A tenant without a home of their own gets 15–17% of rent paid taken straight off the tax bill (Restriction of Special Taxation Act art. 95-2). This is a credit, not a deduction, so it bites much harder per won.
| Requirement | Detail |
|---|---|
| Who | Head of a household owning no home (single-person households and qualifying household members included) |
| Income | Gross salary 80M won or less excluded if aggregate income exceeds 70M won |
| Property | National housing size or officially assessed value of 400M won or less residential officetels and gosiwon included |
| Rate | Gross salary 55M won or less: 17% / 55M–80M won: 15% |
| Cap | 10M won per year |
| Address | The address on the lease must match the address on your resident registration abstract |
| Signatory | Since 2017, a lease signed by a qualifying dependant (e.g. spouse) also qualifies |
The requirements, paperwork and filing steps are covered on their own in the monthly rent tax credit guide. The address match is what trips people in practice — a delayed move-in report, or a lease address that differs from the registration by a single character. It is also fixable within the year, which is exactly why it belongs on a December checklist.
Rent goes into one deduction or the other, never both. The guide states that rent claimed under the monthly rent tax credit cannot also be counted in the cash-receipt or card deduction. Read it the other way and it becomes useful: a worker who cannot claim the rent credit (income too high, not a household head) can have the rent issued as a cash receipt and run it through the card deduction instead. Failing the rent test is not the end of the road — it is a redirection.
The ten over-claimed deductions the NTS names
The front of the guide lists the errors the NTS catches every year. Avoiding these is worth more than finding one more deduction, because clawbacks carry penalty tax.
| # | Over-claim |
|---|---|
| ① | Claiming a dependant whose income exceeds 1 million won |
| ② | Double-claiming a dependant (siblings each listing the same parent) |
| ③ | Personal deduction for a deceased person |
| ④ | Claiming a divorced spouse |
| ⑤ | Claiming a dependant who fails the age test |
| ⑥ | Double-claiming education or medical expenses |
| ⑦ | Housing-fund deduction errors |
| ⑧ | Education expense errors |
| ⑨ | Medical expenses — amounts reimbursed by indemnity insurance, and refunds of the out-of-pocket maximum |
| ⑩ | Errors in the SME young-worker income tax reduction |
This is where the damage is underestimated. If you fall into ①–⑤, you do not merely lose the 1.5 million won personal deduction. The special deductions filed under that person — insurance premiums, education, card spending, donations — are disallowed too. Not knowing a parent's income crossed 1 million won costs you their medical and card totals as well, not just the headline 1.5 million.
Item ⑨ catches people routinely: if you paid a hospital bill by card and the insurer reimbursed you, the reimbursed portion is not deductible medical expense. A past filing can still be corrected within five years — and it is worth checking whether the tax office is already holding a refund for you.
What can you actually do before December
- 1. Open the Hometax year-end settlement preview. It loads your card spending from around September–October. Check first whether you have cleared the 25% floor at all.
- 2. If you have not cleared it — changing payment methods for the rest of the year achieves little. Stop here unless you intend to increase total spending.
- 3. If you have cleared it — move further spending to debit cards and cash receipts (30%) and to traditional markets and public transport (40%). From this point the payment method genuinely changes the number.
- 4. Check your remaining pension contribution room. If you have cash and can fund it by 31 December, this moves the outcome more than anything else available in December.
- 5. If you rent, compare the two addresses. Lease address versus resident registration address; fix any mismatch within the year.
- 6. Check your dependants' income this year. If someone has crossed 1 million won (or 5 million won gross for wage-only income), do not list them. Leaving them off is far cheaper than having them removed later.
Which obligations fall in which month is laid out in the household tax calendar.
Questions this raises
Doesn't my employer handle all of this?
Your employer handles the automatic import of simplified data. Rent, donations, glasses and school uniforms, and some medical expenses do not appear in that feed — you have to submit the receipts yourself. Whatever you miss simply is not refunded.
Dual-earner couple — whose card should we load up?
The floor is set against each person's own gross salary, so the lower earner does clear it more easily. But the caps (3M / 2.5M won) and each person's marginal rate bind at the same time, so piling everything onto one spouse can simply hit the cap. Model both in the Hometax preview rather than following a rule of thumb.
It's July — what should I do first?
Dependants' income and the rent address match. Both are fixable within the year and both attract penalty tax if left wrong. Cards and pensions can wait until the preview opens in autumn.
I missed a deduction last year — is it gone?
No. A corrected claim can be filed within five years of the statutory deadline. Whether you also have unclaimed refunds sitting with the tax office takes about five minutes to check.
Sources
- National Tax Service — 2025 Year-End Settlement Filing Guide for Withholding Agents, card-spending deduction section (pp. 132–136). Source of the per-method rates (credit 15% / cash receipt, debit, prepaid 30% / traditional market and transport 40% / culture and sport 30%), the formula that absorbs the floor starting from the lowest rate, the caps (3M / 2.5M won base, 3M / 2M won extra), the full exclusion list, the sibling-card rule, and the addition of swimming pool and gym fees from 1 July 2025.
- National Tax Service — same guide, monthly rent tax credit section (pp. 202–203). Source of the 80M won gross salary test, the 400M won assessed-value ceiling, the 17% / 15% rates, the 10M won cap, the requirement that “the address on the lease agreement and the address on the resident registration abstract must be the same”, and the rule that rent claimed as a credit cannot also be claimed under the card deduction.
- National Tax Service — same guide, pension account tax credit section (pp. 164–166). Source of “12% [15% for residents with aggregate income of 45 million won or less, or gross salary of 55 million won or less where income is wage income only]”, the 6M / 9M won ceilings, the 10% ISA transfer credit capped at 3M won, and the excess-contribution conversion rule.
- National Tax Service — same guide, summary section on over-claimed deductions. Source of items ①–⑩ and of the statement that ①–⑤ disallow not only the personal deduction but the special deductions filed under that person.
- Seoul Metropolitan Government — “Credit card vs debit card: the golden ratio for year-end settlement”. Cited as the source of the received wisdom this article tests. Its 25% threshold and its per-method rates match the NTS guide, and it carries the sentence quoted above verbatim. Posted December 2019, so its caps are outdated; no figure in this article rests on it.
- Seoul Labor Rights Center — posting of the 2023 edition of the same NTS guide (31 Dec 2023). Confirms that this manual is the official document distributed to company payroll staff and is reissued annually.
- National Tax Service — pension income withholding guide. Used to confirm the settlement flow and the 1.5 million won personal deduction figure.
Where to check further
- Changes for the 2026 income year — checked here, at the National Tax Service year-end settlement hub. This article follows the 2025 guide. The 2026 edition goes up each November or December — check the income year on the page first, since the previous edition stays up for a while.
- Whether the deduction rates include local income tax. NTS documents state income tax only, and the widely quoted 16.5% and 13.2% appear to add local income tax, but no public document says so — the NTS helpline (126) can confirm.
- Optimal allocation between two working spouses. Threshold, cap and marginal rate interact, so the answer changes case by case — the preview on Hometax's year-end settlement page compares both splits using your actual records. The preview usually opens around October and the data service around 15 January.
Written as of July 2026 for income year 2025. Every figure above was read from the National Tax Service's own guide; this is general information, not tax advice. Confirm your own case on Hometax or with the tax helpline (126). If your income comes from more than one source, see also comprehensive income tax and the earned income and child credits. What you paid into a pension account can be checked ahead of time with the pension savings and IRP credit calculator — there are two caps, so where it went decides the answer. If you pay rent, the monthly rent credit calculator counts it by days rather than by months.
Once the preparation is done, run the numbers — the year-end settlement calculator works down from gross pay to the tax determined in the order the statute sets, and says refund or bill.
