National Tax Service warns of common year-end tax settlement mistakes

The National Tax Service has warned workers to avoid common filing errors, such as duplicate dependent claims or incorrect monthly rent credits, to ensure they do not miss deduction benefits. To qualify for monthly rent tax credits, workers must have a total salary of 80 million won or less and reside in a home with an exclusive area of 85㎡ or less.

While the year-end tax settlement occurs every year, many workers miss out on deduction benefits or face future issues due to incorrect filings caused by complacency. According to guidance from the National Tax Service, workers must carefully check four common mistakes: dependent income requirements, actual residency requirements for monthly rent tax credits, and the handling of medical expense refunds.

Reconfirming dependent income requirements and avoiding duplicate deductions

The most frequent mistake is reporting dependent deductions identically to the previous year. Even if a dependent received a deduction in the prior year, the income requirements for the current year must be re-verified. In principle, the annual income amount for a dependent must be 1 million won or less for 2026; if the dependent only has earned income, they meet the requirement if their total salary is 5 million won or less.

Special care is needed to ensure dual-income couples do not claim the same child for deductions, or that siblings do not duplicate claims for parents. If a dependent who exceeds the income requirement is included in the deduction list, the taxpayer will be ineligible for senior or disability additional deductions for that person, as well as credit card usage, insurance premiums, education expenses, and donation deductions. However, special education expenses for the disabled are not subject to the income requirement, and medical expenses paid for a dependent who exceeds the income requirement may still be eligible for deduction, requiring separate verification.

Strict requirements for monthly rent and housing fund deductions

The monthly rent tax credit is not available to everyone simply because they paid rent. To qualify, a worker must have a total salary of 80 million won or less (or a comprehensive income amount of 70 million won or less) and must be the head of a non-homeowning household as of December 31, 2026. If the head of the household does not claim housing-related deductions, a household member may do so. Additionally, the eligible housing must have an exclusive area of 85㎡ or less or a standard market value of 400 million won or less.

Actual residency and the address registered on the resident registration are also key points of inspection. If the address on the resident registration differs from the address on the lease agreement, the deduction cannot be received, and those who do not actually reside in the housing are also excluded. For example, even if parents pay monthly rent for a child attending school in a different region, they cannot receive the monthly rent tax credit if the parents do not reside in that house.

Requirements for housing fund deductions also vary by item. For the repayment of principal and interest on housing lease loans, the taxpayer must belong to a non-homeowning household as of December 31, 2026. However, for the interest repayment on long-term mortgage loans, deductions are available if the taxpayer meets the requirements as the head of a household that owns either no home or one home. For houses acquired on or after January 1, 2024, the standard market value at the time of acquisition must be 600 million won or less. Furthermore, the name of the loan holder must match the homeowner, making verification of the loan holder essential.

Excluding medical refunds and checking for missing items in simplified services

When claiming medical expense tax credits, one must account for indemnity health insurance payouts or post-refunds from the National Health Insurance Service's ceiling system for out-of-pocket expenses. Only the amount remaining after subtracting insurance payouts or refunds from the actual medical expenses paid should be subject to deduction. For example, if 1 million won was spent on medical expenses but 700,000 won was returned through indemnity insurance, the deduction amount is 300,000 won. Additionally, as a rule, medical expenses for a dependent should be claimed by the person who reported that dependent as a basic deduction subject.

Even when using the Year-end Tax Settlement Simplified Service, not all data is automatically retrieved. Items such as academy fees for preschoolers, physical education facility fees, and school uniform purchase costs may be omitted, requiring taxpayers to collect receipts manually. Other items that require individual verification include the purchase of glasses and contact lenses, medical devices such as hearing aids, special education expenses for the disabled, unissued electronic donation receipts, and documentation related to monthly rent.

To retrieve data for a dependent, the dependent must have previously provided consent for data provision. The National Tax Service emphasized that the simplified service is merely a tool to help conveniently check deduction evidence, and workers themselves must judge whether they meet the actual deduction requirements and prepare and submit the necessary supporting documents.

Source: original video (YouTube)