# Year-End Tax Settlement Calculator

> Estimate your Korean year-end tax refund or additional payment with detailed deduction breakdown.

## What is this calculator?

The Year-End Tax Settlement Calculator (연말정산 계산기) is designed for Korean wage earners to estimate their annual tax refund or additional tax payment. Year-end tax settlement is a mandatory annual process in South Korea where employers reconcile the income tax withheld from employees' monthly salaries throughout the year against the actual tax liability calculated after applying all eligible deductions and credits. This process typically occurs in January-February, and the result is either a refund (if too much tax was withheld) or an additional payment (if too little was withheld). The Korean tax system offers an extensive array of income deductions (소득공제) — which reduce your taxable income — and tax credits (세액공제) — which directly reduce your tax bill. This calculator models the most commonly used deductions including earned income deduction, card spending deduction, personal exemption deduction, as well as tax credits for medical expenses, education expenses, donations, and the earned income tax credit. Understanding these deductions can help you plan your spending throughout the year to maximize your refund.

## How to use

Step 1: Enter your annual gross salary (총급여). This is your total compensation before any deductions, including base salary, bonuses, and taxable allowances. Do not include non-taxable items like meal allowances under 200,000 KRW/month.

Step 2: Enter your annual credit card spending amount. Credit card payments receive a 15% deduction rate on the amount exceeding 25% of your gross salary.

Step 3: Enter your annual debit card and cash receipt spending. These payment methods receive a higher 30% deduction rate, making them more tax-efficient for amounts above the 25% salary threshold.

Step 4: Enter medical expenses if applicable. Medical expense tax credits apply to the portion exceeding 3% of your gross salary at a 15% credit rate. This includes hospital fees, prescription medication, health checkups, and corrective devices.

Step 5: Enter education expenses including tuition for yourself, your children, or dependents. University tuition, school fees, and qualified educational materials are eligible at a 15% credit rate.

Step 6: Enter donation amounts. Donations to qualified organizations receive a 15% credit (or 30% for amounts exceeding 10 million KRW).

Step 7: Enter the number of dependents excluding yourself. Each dependent qualifies for a 1.5 million KRW personal exemption deduction. Dependents include children, elderly parents, and other qualifying family members.

Step 8: Review the comprehensive results showing your estimated refund or additional payment, along with a detailed breakdown of every deduction and credit applied.

## How it's calculated

The year-end tax settlement follows a multi-step calculation process defined by the Korean Income Tax Act:

1. Earned Income Deduction (근로소득공제):
• Up to 5M KRW: 70%
• 5M-15M KRW: 40%
• 15M-45M KRW: 15%
• 45M-100M KRW: 5%
• Over 100M KRW: 2%
Result: Earned Income Amount = Gross Salary - Earned Income Deduction

2. Income Deductions (소득공제):
• Personal Exemption: 1,500,000 KRW × (1 + number of dependents)
• Card Spending Deduction: Only the amount exceeding 25% of gross salary qualifies.
  - Credit card: 15% deduction rate
  - Debit card / cash receipts: 30% deduction rate
  - Maximum deduction: 3,000,000 KRW (for salary ≤ 70M), 2,500,000 KRW (70M-120M), 2,000,000 KRW (over 120M)

3. Tax Base = Earned Income Amount - Total Income Deductions

4. Progressive Tax Rates:
• Up to 14M: 6% | 14M-50M: 15% | 50M-88M: 24% | 88M-150M: 35% | 150M-300M: 38% | 300M-500M: 40% | 500M-1B: 42% | Over 1B: 45%

5. Tax Credits (세액공제):
• Earned Income Tax Credit: varies by calculated tax amount (max 740,000 KRW)
• Medical: (Medical expenses - 3% of salary) × 15% (max 7M KRW)
• Education: Education expenses × 15%
• Donations: Up to 10M × 15% + excess × 30%

6. Final Tax = Calculated Tax - Tax Credits
7. Estimated Withholding = approximated from simplified tax tables
8. Refund/Payment = Estimated Withholding - Final Tax (positive = refund)

## Useful tips

1. Strategic Card Usage: The single most impactful strategy for year-end tax savings is optimizing your card spending. Since only spending above 25% of your gross salary qualifies for deductions, use credit cards (which may offer rewards/cashback) for your first 25% of spending, then switch to debit cards or cash receipts for the remainder. Debit cards provide a 30% deduction rate — double the 15% rate for credit cards — on qualifying amounts.

2. Maximize the Medical Expense Credit: Medical expenses only generate a tax credit for amounts exceeding 3% of your gross salary. If you are close to this threshold, consider scheduling elective procedures (dental work, vision correction, health checkups) before year-end to push past the 3% floor. Prescription medications, hospital co-pays, and corrective devices all count.

3. Dependent Claims: Each dependent provides a 1.5 million KRW personal exemption. Ensure you claim all eligible dependents including children under 20, parents over 60 (with income under 1 million KRW), and other qualifying family members. For dual-income couples, the higher earner should generally claim more dependents for maximum benefit.

4. Donation Planning: Donations to registered charities, religious organizations, political parties, and educational institutions qualify for tax credits. Amounts up to 10 million KRW receive a 15% credit, and amounts above 10 million KRW receive 30%. Timing large charitable gifts before year-end can boost your refund.

5. Education Expense Documentation: Keep all receipts for tuition, school fees, textbooks, and qualifying educational activities. University tuition for yourself has no cap, while elementary/secondary school tuition is limited to 3 million KRW per child.

6. Common Mistakes to Avoid: Do not include tax-exempt income in your gross salary. Do not double-count dependents who are claimed by another family member. Remember that the maximum card deduction has a salary-based cap that many taxpayers overlook. This calculator provides simplified estimates — actual settlements include additional categories like housing fund deductions, pension contributions, and insurance premium deductions.

## FAQ

### Q. How much refund can I expect on a 50M KRW salary?

The refund amount varies enormously depending on your specific deductions and credits. With a 50M KRW salary, a typical employee with moderate card spending (15M credit + 5M debit), 2 dependents, and 2M in medical expenses might expect a refund in the range of 300,000-800,000 KRW. However, an employee with the same salary but heavy debit card usage, 3 dependents, and significant medical/education expenses could receive a refund exceeding 1.5 million KRW. Enter your actual figures in the calculator for a personalized estimate.

### Q. Credit card vs debit card — which is better for deductions?

For year-end tax deduction purposes, debit cards and cash receipts are definitively better, offering a 30% deduction rate compared to credit cards' 15% rate. However, this only applies to spending above 25% of your gross salary — spending below this threshold does not qualify for any deduction regardless of payment method. The optimal strategy is to use credit cards (which may offer their own rewards and cashback) for daily spending until you reach the 25% threshold, then switch to debit cards or cash receipts exclusively for the remainder of the year.

### Q. How is the estimated tax paid calculated?

The estimated tax paid (기납부세액) represents the total income tax and local income tax withheld from your monthly paychecks throughout the year by your employer. Korean employers use simplified withholding tax tables provided by the National Tax Service to calculate monthly withholding amounts based on salary level and number of dependents. This calculator estimates the withheld amount using these simplified tables. The actual amount may differ from the estimate because employers may apply different withholding options (80%, 100%, or 120% of the standard amount), and bonus payments may have been taxed at different rates.

### Q. What is the earned income tax credit and who qualifies?

The earned income tax credit (근로소득세액공제) is an automatic tax credit applied to all wage earners that reduces the calculated tax amount. For calculated tax up to 1.3 million KRW, the credit is 55% of the calculated tax. For calculated tax above 1.3 million KRW, the credit is 715,000 KRW plus 30% of the excess over 1.3 million KRW, with a maximum cap of 740,000 KRW for salaries up to 33 million KRW, 660,000 KRW for 33-70 million KRW, and 500,000 KRW for salaries above 70 million KRW. This credit is applied automatically — no special action is required.

### Q. Are there deduction categories not covered by this calculator?

Yes, this calculator covers the most commonly used deductions, but the actual year-end settlement includes additional categories such as: National Pension contributions (deducted from income), National Health Insurance premiums (tax credit), employment insurance premiums (tax credit), housing fund savings deductions (for non-homeowners), private pension savings tax credits, housing loan interest deductions, monthly rent tax credits (for qualifying renters), and special deductions for persons with disabilities. For a complete settlement, use the National Tax Service's Hometax (홈택스) simplified year-end settlement service, which automatically aggregates data from all sources.