With only 10 days left until 2024, is it possible to enjoy last-minute tax benefits?
The National Tax Service recommended using surplus funds for pension accounts, dwellings subscription savings, or youth-type long-term collective investment securities savings. This is because income and tax credit benefits can be obtained.
◇ tax-saving possible with year-end income and tax credit benefit products
According to the National Tax Service on the 21st, contributing to a pension account can provide a tax credit of 12% on contributions up to 6 million won. For workers with a total salary of 55 million won or less, a tax credit of up to 15% of contributions is available.
However, it should be noted that if a pension account is terminated early or received in a lump sum through non-pension methods, an additional 15% income tax is imposed.
Contributing to dwellings subscription savings is also a way to increase income deductions. Until last year, it was possible to receive an income deduction of up to 40% of contributions with a limit of 2.4 million won. From this year, the limit has increased to 3 million won, allowing a maximum income deduction of 1.2 million won with the 40% application.
The youth-type long-term collective investment securities can provide an income deduction of 40% on annual contributions, limited to 6 million won. A maximum deduction benefit of 2.4 million won can be obtained. However, if this product is terminated within three years from the date of subscription, an additional tax of 6% is added.
Joining a product for long-term investment purposes is advantageous for tax planning; however, if terminated after a short period, additional tax will be imposed, so careful judgment is necessary.
An official from the National Tax Service noted, "Young workers sometimes face difficulties after investing all surplus funds in subscription savings to take advantage of year-end settlements, only to find unexpected urgent expenditure needs arise," and recommended, "Carefully evaluate the amount needed for deductions and the scale of necessary emergency funds before investing in subscription savings."
Utilizing donation tax credits is also effective. If there is carried-forward donations from 2021 and 2022, when the donation deduction rate was temporarily raised by 5 percentage points, it is advantageous to deduct these first before the donations made this year, as the applicable deduction rate is higher.
Hometown love donations are also gaining attention as a means of tax planning. By donating up to 100,000 won to local governments outside one's resident registration area, a 100% tax credit is received. For amounts exceeding 100,000 won and up to 5 million won, a 15% tax credit is applied. Additionally, regional specialties equivalent to 30% of the donation amount can be received as a bonus.
◇ if you bought a home this year, you can't deduct monthly rent or loan interest
Is there anything else to be aware of for year-end tax settlements? The National Tax Service emphasized that taxpayers who purchased dwellings this year should note that income deductions cannot be received on the repayment of jeonse loans or subscription savings contributions paid this year.
An official from the National Tax Service explained, "Taxpayers who became the head of a one-dwelling household as of Dec. 31 this year cannot receive income deductions, even if they have principal repayment on dwelling rental loans or subscription savings contributions the same year. Additionally, monthly rent paid prior to dwelling purchase also cannot be credited as a tax credit."
Is it possible to include separately residing parents in the dependency deduction? If direct line ascendants meet income and age requirements, they are eligible for basic deductions if actually supported, even while living separately. For dependent family requirements, annual income must be 1 million won or less (total earned income less than 5 million won), and birth year must be before Dec. 31, 1964.
What if siblings jointly claim parents as dependents for basic deductions? An official from the National Tax Service stated, "The principle is to consider the claimant who can prove actual support as eligible for deductions. If this is unclear, the dependent of the person who claimed personal deduction in the previous tax period is considered. If no one claimed deductions previously, the person with the highest comprehensive income in the tax period is deemed the eligible claimant."
If you had to terminate your pension savings account due to unexpected expenditure in October this year, can you still receive a tax credit for contributions made by September? It's not possible. A National Tax Service official stated, "If the pension account is closed, contributions made in the year of closure cannot be credited, and pension contributions credited as tax credit but received through non-pension methods are subject to a 15% withholding rate as other income."
If you have made mistakes in this year's year-end tax settlement, corrections can be made during next year's comprehensive income tax final return in May, where incorrectly applied income and tax credits may be revised or omitted items can be additionally reflected. The year-end tax settlement for 2024 can be corrected until the comprehensive income tax final declaration on Jun. 2, 2025, without incurring additional tax.
If this is also missed, a correction claim or amended return can be filed from the day after the final declaration deadline (Jun. 3) up to five years later.