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DETAILED GUIDE TO TAX DEDUCTION CATEGORIES (2025)

⚠️ Important Note: This guide applies to income generated in 2025 (Year-end settlement conducted in Jan-Feb 2026). If you choose to calculate tax under the 19% Flat Tax Rate method specifically for foreign workers, you CANNOT apply any of the deductions below (except for mandatory tax exemptions under treaties, if applicable).

1. Housing - MAJOR CHANGES​

A. Monthly Rent Tax Credit (월세액 세액공제)​

This item directly reduces the amount of tax you have to pay (Tax Credit).

  • Eligibility Conditions:
    1. Income: Total Gross Salary ≤ 80 million KRW (or Total Taxable Income ≤ 70 million KRW).
    2. Housing: Area ≤ 85㎡ (National Housing Scale) OR House Value ≤ 400 million KRW. Includes Officetels and Goshiwons.
    3. Residence: You must be a non-homeowner and have registered your residence transfer (on your ARC) to the rental address.
  • Refund Rate:
    • Salary ≤ 55 million KRW: 17% deduction of rent paid.
    • Salary 55 ~ 80 million KRW: 15% deduction of rent paid.
    • Limit: Maximum recognized rent of 10 million KRW/year (i.e., maximum refund of 1.7 million KRW tax).

B. Housing Savings Deduction (Housing Savings) - NEW 2025​

Previously, foreigners were completely excluded from this item. From 2025, regulations have been relaxed.

  • Changes: Foreigners CAN deduct if they satisfy all conditions:
    1. Are a resident with total salary ≤ 70 million KRW.
    2. Are the spouse of a Household Head who does not own a house.
    3. The foreign spouse must have income from salary.
  • Deduction Amount: 40% of the amount paid into the fund (Max 3 million KRW/year).

C. Housing Funds Loan Deduction​

  • Rent Loan (Jeonse/Wolse Loan): Deduct 40% of annual principal and interest repayment (Max 4 million KRW).
  • Mortgage Loan: Deduct interest repayment for long-term loans (over 15 years). Deduction limit from 6 ~ 20 million KRW depending on conditions.

2. Children & Dependents - DEDUCTION RATES INCREASED SIGNIFICANTLY​

A. Child Tax Credit (Child Tax Credit)​

The Korean government has significantly increased support to encourage childbirth.

  • Conditions: Children or grandchildren aged 8 or older (under 8 usually receive monthly child allowance so are not calculated here, except special cases).
  • New Deduction Rates (2025):
    • 1st Child: 250,000 KRW (increased from 150k).
    • 2nd Child: 300,000 KRW (Total for 2 children is 550k).
    • 3rd Child onwards: 400,000 KRW/person (increased from 300k).
    • Example: A family with 3 children will deduct: 250k + 300k + 400k = 950,000 KRW tax.

B. Basic Deduction (Basic Deduction)​

  • Deduction Amount: 1.5 million KRW/person (Self, Spouse, Dependents).
  • Conditions: Dependent must have annual income under 1 million KRW (or total salary under 5 million KRW). Parents ≥ 60 years old, Children ≤ 20 years old.

3. Credit Card & Spending (Credit Card Usage)​

  • Rule: Only spending exceeding 25% of Total Salary is deductible.
  • Deduction Rates:
    • Credit Card: 15%.
    • Check/Debit Card, Cash with receipt: 30%.
    • Public Transport, Traditional Markets: 40%.
  • New 2025 Point: Expenses for Swimming Pools and Fitness Centers are included in the additional deduction category (30% rate) from July 1, 2025 (applies to salary ≤ 70 million KRW).
  • Additional Deduction: If 2025 spending is higher than 2024 (over 5%), the increased portion gets an additional 10% deduction (Max 1 million KRW).

4. Medical Expenses (Medical Expenses)​

  • Condition: Total medical expenses must exceed 3% of Total Salary.
  • Refund Rate: 15% of the excess amount (30% for infertility treatment, 20% for premature/congenital babies).
  • Limits:
    • Self, Elderly (≥65), Disabled: No ceiling.
    • New 2025: Children under 6 years old also have NO ceiling (previously grouped with other dependents with 7 million cap).
    • Other Dependents: Max 7 million KRW/year.

5. Education Expenses​

  • Refund Rate: 15%.
  • Subjects & Limits:
    • Self: Unlimited.
    • Preschool, Elementary to High School: 3 million KRW/person (includes uniforms 500k, books, field trips).
    • University (for children): 9 million KRW/person.
  • Note: Foreigners can NOT deduct tuition for children attending schools abroad.

6. Special Tax Incentives for Talent​

A. Foreign Engineers​

  • Benefits: 50% income tax reduction for 10 years.
  • Target: Engineers working in research institutes or under technology transfer contracts.

B. High-Tech Talent (K-Tech Pass) - NEW 2025​

  • New Target: Holders of K-Tech Pass visa (Excellent talent in 4 fields: Semiconductor, Display, Battery, Bio).
  • Conditions: Master/PhD from top 100 world universities or work experience at top 500 global companies; income 3 times average GNI (approx. 150 million KRW).
  • Benefits: 50% income tax reduction (similar to engineers).

C. Native Speaking Teachers​

  • Benefits: 100% tax exemption for the first 2 years (depends on tax treaty of each country, e.g. USA, Australia, UK exempt; Canada not eligible).

7. Other Items​

  • Donations:
    • Under 100k KRW (political): 100/110 refund.
    • Over 100k KRW or charity: 15% refund (or 30% if >10 million KRW).
    • Hometown Love Donation: Direct tax deduction for local contributions.
  • Insurance:
    • Personal Insurance (Life/Accident): Deduct 12% (max 1 million KRW limit/year).
  • Pension Account:
    • Contributions to IRP/Pension Fund: Deduct 12% or 15% depending on income. Contribution limit recognized up to 9 million KRW.

Note on 19% Flat Tax Rate​

  • Application period extended to 20 years from start of work.
  • If chosen: Company support items (housing, company-paid health insurance) will be calculated as taxable income.