Korea's Credit Card Tax Deduction: How to Maximize Your Refund
The “13th Month Salary” in South Korea
If you live and work in South Korea, you’ve likely heard people talking about the “Year-end Settlement” (Yeon-mal-jeong-san). One of the most common ways to reduce your taxable income is through your spending on credit and debit cards. However, the rules are specific: you must hit a “threshold” before any deductions kick in. The Ahoxy Deduction Simulator helps foreigners and residents alike navigate this localized financial puzzle.
The Golden Rules of Consumption Tax Deduction:
- The 25% Threshold: You only get a tax break on the amount spent after you have spent 25% of your total gross annual salary.
- Differing Rates:
- Credit Cards: 15% deduction rate.
- Debit Cards / Cash Receipts: 30% deduction rate (Double the credit card rate!).
- Capped Benefits: Generally, total deductions are capped at 2 to 3 million KRW per year, depending on your income level.
The Optimal Strategy:
- Phase 1: Use your high-benefit Credit Card for all purchases until you reach the 25% salary threshold.
- Phase 2: Once you pass the 25% mark, switch entirely to your Debit Card or use Cash (with a recorded receipt) to reap the higher 30% deduction rate.
- Bonus Categories: Spending on public transport and traditional markets offers even higher rewards, often up to 40%.
Why Audit Mid-Year?
Waiting until January to see your tax result is a missed opportunity. By auditing your spending patterns now with Ahoxy, you can adjust your behavior for the rest of the year and secure a “13th-month salary” instead of a tax bill.
Get your Korean finances in order with Ahoxy!
What is Credit Card Deduction?
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Disclaimer
This tool is for reference only. Please consult professionals for important decisions.
Usage Guide
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- Recalculate or adjust as needed
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