Credit card tax deduction limits to increase based on number of children

The National Tax Service announced that from the 2026 year-end settlement through 2028, credit card income deduction limits will expand for workers with children. For employees earning 70 million won or less, the deduction limit could reach 4 million won for those with two children.

Office workers preparing for the 2026 year-end tax settlement should check changes in income deduction limits for credit card usage and the requirements for income tax reductions for employees of small and medium enterprises. Notably, starting this year, the income deduction limit for credit card and other usage will be expanded depending on the number of children.

Credit card deduction limits to increase by number of children... applied to amounts exceeding 25%

According to information provided by the National Tax Service, the income deduction for credit card usage applies to the amount exceeding 25% of a worker's total annual salary among the total amounts spent on credit cards, check cards, and cash receipts during one year. For example, for a worker with a total annual salary of 40 million won, the amount spent in excess of 10 million won (25%) is eligible for deduction. However, deductions are not unlimited and are subject to annual limits.

Generally, the deduction limit for workers with a total annual salary of 70 million won or less is 3 million won, while for workers exceeding 70 million won, it is 2.5 million won. Notably, from the 2026 year-end settlement, these limits will be expanded based on the number of children who meet legal requirements. These expanded benefits based on the number of children will apply from 2026 to 2028.

For workers with a total annual salary of 70 million won or less, the deduction limit increases to 3.5 million won if they have one child, and to 4 million won if they have two children. For workers with a total annual salary exceeding 70 million won, the limit is raised to 2.75 million won for one child and up to 3 million won for two or more children.

The deduction rates by payment method are 15% for credit cards and 30% for check cards and cash receipts. Spending at traditional markets and on public transportation can receive a deduction of up to 40%. However, not all expenditures are eligible for deduction. National and local taxes, insurance premiums, electricity, water, and gas bills, apartment management fees, purchase of securities such as gift certificates, and the purchase of new cars are excluded from the deduction. The purchase of used cars may be included in the deduction within a certain amount.

Income tax reduction for SME employees... scope of career-interrupted workers expanded

Employees working at small and medium enterprises should check for income tax reduction benefits. If certain requirements are met, income tax can be reduced by up to 90% depending on age and circumstances. Youth aged 15 to 34 receive a 90% reduction in income tax for five years, while seniors aged 60 or older, persons with disabilities, and career-interrupted workers receive a maximum reduction of 70% for three years. However, specific reduction rates and application periods may vary depending on the timing of employment and individual requirements.

Following a recent amendment to the Restriction of Special Taxation Act, the scope of "career-interrupted workers," one of the eligible groups for reduction, has been expanded. While the scope was previously focused on women who had interrupted their careers, it now includes men who meet the requirements. Career-interrupted workers refer to those who resigned from a company after working there for at least one year due to reasons such as marriage, pregnancy, childbirth, childcare, child education, or family care. They must operate a business in an eligible industry for a period of at least two years but less than 15 years from the date of resignation.

Eligible industries include manufacturing, construction, and restaurants, but employees who are executives of the company, largest shareholders, or their specially related persons may be excluded. The application process involves the worker submitting a reduction application to the company, and the company then submits the relevant documents to the tax office. Even if already employed, individuals can check whether they are eligible for the reduction through the company's human resources or payroll department.

Source: original video (YouTube)