Household with Three Children Will Get W1.5M Tax Credit

The season for tax credits has come.

Starting this tax year, households with multiple children will get additional tax credits. The change includes expanded medical tax credits, but the double tax credit of both medical fees and credit card usage will no longer apply.

The tax credit for political donations has also changed. In the past, people who paid 100,000 won in donations used to get a 110,000 won tax refund. Now, they get a tax refund in proportion to the donation amount.

Medical and educational tax credits expand-

Until last year, a single household could get 1 million won in tax credits, and a double household could get a 500,000 won combined tax credit. Starting this year, the policy was replaced with a tax credit for households with multiple children. For example, a household with one or two children gets 500,000 won in tax credit, and 1 million won per an additional child. So a family with three children gets a deduction of 1.5 million won.

In an attempt to expand the tax base for clinics, the government introduced a greater tax credit for medical bills. It includes plastic surgery procedures such as breast augmentation, liposuction, hair transplant, and obesity treatments, as well as oriental herbal medicine.

Last year, one could get a double tax credit if he or she paid medical bill with a credit card. But starting this tax year, one can get tax credit only from medical bills.

The tax credit for education fees of preschoolers has been expanded as well. Until last year, children who spend more than three hours a day and five days a week in kindergarten or childcare centers could get a tax credit, but this year, just one day a week qualifies families for the credit, which means fees for athletic facilities such as a Taekwondo gyms and pools are subject to the tax credit.

The requirement of tax credits for marriage and funeral expenses has been eased. Until now, people with an annual income of 25 million won could get a tax credit of 1 million won when their children under the age of 20 got married, or they had a funeral for a father over 60 or a mother over 55. From this year on, the age limit no longer applies to tax credits.

Last year, one got a tax return for 110,000 won, including resident taxes, when one paid 100,000 won in political donations, but the same person would only get 100,000 this year.

The tax credit for credit card use has changed as well. Until now, in the case of a double income family, a husband got a personal exemption for his children and a wife got a tax credit for credit cards used by her children. This year, a person who gets a personal exemption for children will get tax relief for credit cards used by them.

Pay attention to the details-

In a double income family, a person with more income should get personal exemption for children. The more you earn, the higher income tax you have to pay. This means you can save more tax money.

You can get a tax credit when medical bills exceed three percent of your annual income. For example, an employee who gets 30 million won in an annual income does not have to collect receipts if his medical expenses are less than 900,000 won.

You get a maximum tax credit of 15 percent of the amount that you spend with a credit card and that exceeds 15 percent of your total annual income. In other words, a person with 30 million won in annual income can get a tax credit when he charges 4.5 million won onto a credit card.

A non-homeowner can get a tax credit for payments into savings accounts designated for buying a home, principal for mortgage loans, and interest for long-term mortgage loans. Since the quarterly payment limit for a savings account is 3 million won, you can get a maximum of 1.2 million won, 40 percent of the payment, in tax credits if you open an account in December.

When you realize that you miss some tax credits after filing taxes, you can ask for a correction to your tax office within three years after the tax payment deadline.

The National Tax Service reviews all the tax credits each year, and if it detects falsified donation receipts, violators are forced to pay an additional 10 percent of the tax refund in penalties.

koh@donga.com