Starting next year, the number of low-income working households eligible for the earned income tax credit will increase by 730,000. With income requirements eased and the maximum payment per household raised by about 9%, the total number of beneficiary households is expected to rise from 4.16 million to 4.89 million. The annual rent ceiling eligible for a rent tax credit will expand from 10 million won to 12 million won.
According to the 2026 tax reform plan prepared by the government on the 3rd, the total income threshold by household type for the Earned Income Tax Credit (EITC) will be raised from less than 22 million won to less than 26 million won for single-person households. For single-earner households, it will go from less than 32 million won to less than 37 million won, and for dual-earner households, from less than 44 million won to less than 52 million won.
A government official said the income thresholds were adjusted so that even workers earning at the minimum wage level next year can be covered. Under the current system, there are cases where a single-person household earning at the minimum wage level exceeds the income threshold and cannot receive the earned income tax credit.
The maximum payment per household will also increase. For single-person households, it will rise from 1.65 million won to 1.8 million won, for single-earner households from 2.85 million won to 3.1 million won, and for dual-earner households from 3.3 million won to 3.6 million won.
Next year's rent tax credit will also be expanded. Currently, workers with total salary of 80 million won or less can deduct 15% from income tax on rent paid during the year, up to 10 million won. If total salary is 55 million won or less or total comprehensive income is 45 million won or less, a 17% deduction rate applies.
Going forward, the annual rent ceiling eligible for the tax credit will be raised from 10 million won to 12 million won. Accordingly, the maximum deduction for workers to whom the 15% rate applies will increase from 1.5 million won to 1.8 million won, and the maximum deduction for workers to whom the 17% rate applies will rise from 1.7 million won to 2.04 million won.
In addition, for young people ages 15 to 34, a 17% deduction rate will be applied without a total salary threshold. However, they must still meet the rent tax credit program's own income requirement of total salary of 80 million won or less. When calculating youth age, up to six years of military service will be excluded, so even a person actually age 40 can receive the benefit. The preferential youth deduction rate will apply to rent expenditure paid in 2027 to 2029.
Tax support for contributions to individual retirement pensions (IRP) by young people will also be expanded starting next year. Currently, contributions to pension accounts, including pension savings, are eligible for a 12% tax credit up to an annual limit of 9 million won, or 15% if total salary is 55 million won or less. Going forward, a 15% deduction rate will be applied to young people regardless of income level. For example, if a young person with a total salary of 60 million won contributes 3 million won per year to an IRP, the tax credit will increase by 90,000 won, from the current 360,000 won to 450,000 won.