Income Tax Deduction Only Applies Above 25% of Your Annual Income

This year, 25% of your total salary is your 'deduction threshold'. 

The deduction rates for different card types are applied to the amount exceeding this threshold.

Key Summary

• • Deductions begin from the amount exceeding 25% of your total salary.
• • Deduction rates: Credit card 15%, Debit/Cash receipts 30%, Traditional markets/Public transport 40%.
• • Limit: 3 million won for total salary 70 million won or less, 2.5 million won for amounts exceeding this.

Terms Explained Simply

• • Total Salary: The annual salary amount used for year-end tax settlement (shown on payslips/withholding receipts).
• • Minimum Spending Amount: 25% of total salary. Deductions start after exceeding this amount.
• • Deduction Limit: The maximum deductible amount per year (2.5 to 3 million won).
• • Cash Receipt: A record of usage accumulated with a registration number when paying in cash (30% deduction rate, same as debit cards).
• • Traditional Market/Public Transport: Usage in these categories receives preferential treatment with a 40% deduction rate.

30-Second Check

• • What is my total salary? (Check payslip/withholding receipt)
• • Have my total credit card and cash receipt spending this year exceeded 25% of my total salary?
• • If not yet reached, do I have a plan to reach the 25% threshold in the remaining period?
  👉 If you answer yes to 3 or more of these, you are close to meeting the deduction requirements.

Points of Change

• • There are no deductions before reaching 25%; deductions apply only to the amount exceeding 25%.
• • Debit/Cash at 30% is higher than Credit at 15% (consider timing and limits).
• • The limit is 2.5 to 3 million won per year, varying by income bracket.

Case Comparison

• • Applicable Range: 40 million won total salary vs 75 million won
• • Key Differences: Minimum spending amounts are 10 million won vs 18.75 million won respectively, and the limits are 3 million won vs 2.5 million won.
• • Actual Impact: Even with the same spending, the refund difference arises due to the speed of reaching 25% and the limit difference.

What to Do Now

1. • Calculate 25% of this year's total salary (make a note).
2. • Check the current accumulated total for credit card and cash receipts (use simplified tax forms/card company app).
3. • If below 25%, prioritize using credit cards first in the remaining period (distribute payments) to reach the threshold, then switch to primarily using debit/cash after reaching it (detailed in Part 2).

Mini Calculation Table (Example)

Practical Examples

• • A: Total salary 40 million won, accumulated spending until October 8.2 million won → Below 25%. Needs an additional 1.8 million won spending, primarily with credit cards before December.
• • B: Total salary 75 million won, accumulated spending until September 21 million won → Exceeded 25%. Utilizes the 30% deduction rate with debit/cash cards primarily thereafter.

Confusing Points

• • “Some deduction is possible even if I don't reach 25%” → Incorrect. Deductions are only applied to the amount exceeding 25%.
• • “Overseas spending is included” → Excluded. (The law explicitly states 'excluding overseas spending').
• • “Family cards are deducted by the person who paid” → Incorrect. Deductions are based on the cardholder's name.

Next Article

• • The difference in refunds becomes significant between Credit card 15% and Debit card 30% (Strategy for switching after reaching 25%).