[Korean Tax Common Sense Series 7] If medical expenses exceed 3% of your total salary, your refund increases.

If medical expenses exceed 3% of total salary, the refund increases

If the 3% threshold is not met, there is almost no refund even if you pay medical expenses.

Key Summary

• The medical expense tax credit applies 15%, 20%, or 30% to the amount exceeding ‘sum of medical expenses − 3% of total salary’. (The tax credit rate varies by item.)

• There is no limit for expenses incurred by oneself, children under 6, individuals over 65, or persons with disabilities. For other family members, the annual limit is 7 million KRW.

• Infertility treatment is 30%, premature infants and congenital conditions are 20%, and general medical expenses are 15%.

Term Explained in One Line

• Total Salary: The total amount of salary received in a year (before certain non-taxable income is excluded; the company calculates this).

• Tax Credit: A method of reducing the tax itself, not the taxable income (it has a clear effect).

• Basic Deduction Eligible Dependent: A family member, such as a spouse or child, who can be jointly deducted if they meet the requirements.

• Threshold (3%): The minimum line that must be exceeded for medical expenses to be deductible.

• Postpartum Care Costs: Costs up to 2 million KRW per childbirth are recognized as medical expenses.

30-Second Check

• Does the sum of this year's medical expenses exceed 3% of your total salary?

• Do the expenses fall under self/under 6/over 65/disabled/infertility categories?

• Are these the net expenses after deducting insurance reimbursements and company benefits (e.g., private insurance)? (Reimbursed amounts are excluded)
  👉 If you answered yes to 3 or more questions, it is highly likely that you are eligible for the medical expense tax credit.

Points of Change

• Once the (3%) threshold is met, the refund can range from tens of thousands to hundreds of thousands of KRW.

• Medical expenses for oneself, infants, seniors, and persons with disabilities have no limit, so larger expenses are more advantageous.

• Expenses such as overseas medical bills, cosmetic surgery, and nursing care costs, as well as amounts reimbursed by insurance, are excluded.

Case Comparison

• Scope of Application: General family medical expenses (annual limit of 7 million KRW) vs Self, under 6, over 65, disabled (no limit)

• Key Difference: The deduction rate (15%/20%/30%) applied to the amount exceeding the threshold and the presence or absence of a limit determine the outcome.

• Actual Impact: If the threshold is met, the refund amount immediately increases, even with the general 15% rate. If it's for infertility or special categories, the effect is greater.

What to Do Now

1. Calculate your total salary for the year and your net medical expenses (after insurance deductions).

2. Calculation: Check if sum of medical expenses − total salary × 3% is greater than 0.

3. Categorize: Separate into General (15%), Premature/Congenital (20%), Infertility (30%), and Postpartum Care (2 million KRW limit).

4. Gather Documentation: Combine data from the Simplified Service (starts January 15th) with your own receipts (excluding overseas medical expenses) to create a folder of supporting documents.

5. Final Review: Check for duplicates or omissions according to the company's submission form. (Exclude cosmetic surgery, nursing care, and overseas medical expenses)

Practical Example

• A: Total Salary 36 million KRW, General Medical Expenses 1 million KRW → Threshold 1.08 million KRW not met → 0 KRW credit.

• B: Total Salary 50 million KRW, Own Surgery Expenses 3.5 million KRW (Insurance 1 million KRW received) → Net Expenses 2.5 million KRW − Threshold 1.5 million KRW = 1 million KRW, Credit 15% = 150,000 KRW.

• C: Total Salary 40 million KRW, Infertility treatment 2.5 million KRW solely → Amount exceeding threshold 1.2 million KRW: 1.3 million KRW × 30% = 390,000 KRW credit.

Confusing Points

• "Full deduction for all medical expenses" → Only the amount exceeding the 3% threshold, and the rates/limits vary by item.

• "Full deduction even with insurance reimbursement" → Reimbursed amounts are excluded.

• "Overseas medical expenses are also deductible" → Expenses incurred at medical institutions located overseas are not eligible.

Next Episode

• What is included in children's education expenses, which can be up to 3 million or 9 million KRW per person?