Sean Daily

This is an English version of our Korean article, based on public information as of October 4, 2026. Please check the official sources below for the latest details.

Read the original Korean article

As year-end approaches, news about year-end tax settlement (연말정산) pours out, and it is easy to get confused because rules already in effect and proposed amendments that have not yet passed the National Assembly are reported mixed together. This article separates the two and starts with what actually affects the settlement you will make early next year on income earned in 2026. Eligibility for many Korean programs depends on residency or registration status in Korea, so please confirm on the official site.

〰

First, a clarification: what is settled differs from what is proposed

The 2026 year-end settlement is based on income and spending from January to December 2026. The settlement is usually done early the following year, so it is commonly called the tax-year-2026 settlement. That means tax law in effect since January 1 this year applies to this settlement, but amendments that apply from January next year have nothing to do with it.

The 2026 tax reform proposal (세제개편안) was announced on August 3 and, after advance notice of legislation and consultation among ministries, was finalized as the government proposal at the Cabinet meeting on September 1. According to the Ministry of Finance and Economy (재정경제부), 11 tax law amendment bills were submitted to the National Assembly by September 3 and are scheduled to be reviewed in the regular session. Content or effective dates may change during the National Assembly’s review, so in this article we will keep calling this part a proposed amendment.

〰

What changed this year: the tax-year-2026 settlement

From the changes for 2026 that the Ministry of Finance and Economy announced on January 5 this year, we picked the items relevant to employees.

The first is the higher income deduction limit for credit cards and similar payments, depending on the number of children. Add KRW 500,000 to the base limit for one child and KRW 1 million for two or more children, and if total salary exceeds KRW 70 million, add KRW 250,000 and KRW 500,000 respectively. It applies through December 31, 2028.

Total salary bracket	Previous base limit	1 child	2 or more children
KRW 70 million or less	KRW 3 million	KRW 3.5 million	KRW 4 million
Over KRW 70 million	KRW 2.5 million	KRW 2.75 million	KRW 3 million

The second is the expanded tax-exempt limit for childcare allowances. The benefit received in connection with the care of children aged 6 or under changes from KRW 200,000 per month per employee to KRW 200,000 per month per child. It applies to amounts received on or after January 1, 2026.

The third is tax support for arts and sports academy fees for lower elementary grades. Arts and sports academy fees for children under age 9 were added to the education expense tax credit, and the limit for elementary, middle and high school students is KRW 3 million. It applies to spending on or after January 1, 2026.

However, the requirements for eligible children and the limit calculation may differ by household. For exactly how it applies in your case, check the National Tax Service (NTS, 국세청) year-end settlement guidance or ask the person in charge at your company.

〰

Employee-related proposed amendments in the tax reform proposal

The table below picks only the employee-relevant items from the detailed version of the Ministry of Finance and Economy’s tax reform proposal and compares current law with the proposed amendment. Be sure to look at the effective date as well.

Item	Current	Proposed amendment	Effective date
Monthly rent tax credit	Annual limit KRW 10 million; 17% for total salary up to KRW 55 million, 15% up to KRW 80 million	Limit KRW 12 million; for young people (ages 15-34), 17% regardless of total salary (until Dec. 31, 2029)	For rent paid on or after Jan. 1, 2027
Income requirement for basic-deduction dependents	Income amount KRW 1 million or less; if only earned income, total salary KRW 5 million or less	Income amount KRW 3 million or less; if only earned income, total salary KRW 7.5 million or less	For tax periods beginning on or after Jan. 1, 2027
Tax credit for young people’s retirement pension (IRP) contributions	Rate 12% (15% for total salary up to KRW 55 million)	15% for young people (ages 15-34)	For contributions made on or after Jan. 1, 2027
Income deduction for principal and interest repayment on housing lease loans	Householder employees in households without a home; limit KRW 4 million	Expanded to include employee spouses of householders who meet certain requirements (combined limit KRW 4 million)	For repayments made on or after Jan. 1, 2027
Income tax exemption for childbirth support payments	Within 2 years after the child’s birth, up to 2 times per child	Period expanded to run from the date of pregnancy until 2 years after the child’s birth	For payments made on or after Jan. 1, 2027
Earned Income Tax Credit (EITC)	Maximum KRW 1.65 million for single, KRW 2.85 million for single-earner, KRW 3.3 million for dual-earner households	Raised to KRW 1.8 million for single, KRW 3.1 million for single-earner, KRW 3.6 million for dual-earner households, with the payment range expanded	For tax periods beginning on or after Jan. 1, 2027

As the table shows, most of these apply from January 1, 2027 onward. For this year’s year-end settlement the existing criteria stay as they are, and if the proposed amendments pass the National Assembly, they will affect the tax-year-2027 settlement, that is, the settlement in early 2028. Also remember that the EITC is a system you apply for separately from year-end settlement.

〰

What to check before this year’s settlement

If you pay monthly rent, check the current criteria first. According to NTS guidance, you can receive the credit if you are a householder employee without a home with total salary of KRW 80 million or less, you live in a home at or below the national housing size or with an official standard price of KRW 400 million or less, and the addresses on your lease contract and your resident registration certificate (주민등록등본) are the same. The credit rate is 17% for total salary up to KRW 55 million and 15% above that up to KRW 80 million, and the rent limit is KRW 10 million per year.

If you have paid your rent by bank transfer, you can also apply for a monthly rent cash receipt on Hometax (홈택스). The guidance says that if you attach the lease contract and your rent payment records, the tax office reviews them and then issues the receipt. Even if you cannot receive the monthly rent tax credit, you can use the cash receipt amount for the credit card and similar income deduction.

Also review products for which amounts paid by December 31 are reflected in your deductions. Under the criteria the NTS announced last December, a housing subscription savings account allowed a 40% income deduction on up to KRW 3 million a year, and pension accounts allowed a tax credit on up to KRW 6 million for pension savings, or up to KRW 9 million combined with retirement pension. Check this year’s limits again in the NTS year-end settlement comprehensive guide.

Let us also point out some common mistakes. Typical ones are calculating this year’s settlement as if a proposed amendment were already settled, trying to claim the rent credit after buying a home during the year and becoming a homeowner as of December 31, and expecting the credit for a rent contract where the move-in was never reported (전입신고).

〰

Frequently asked questions

Q. Does the KRW 12 million rent limit apply from this year’s year-end settlement?

No. The proposed amendment applies to rent paid on or after January 1, 2027. For this year’s settlement, the annual limit of KRW 10 million stays as it is.

Q. Is the relaxation of the dependent income requirement to KRW 3 million also effective from this year?

No. The criteria of KRW 3 million in income amount and KRW 7.5 million in total salary are a proposed amendment that applies to tax periods beginning on or after January 1, 2027. This year the existing criteria apply: an income amount of KRW 1 million, or, if there is only earned income, total salary of KRW 5 million.

Q. Is the tax reform proposal already finalized?

Not yet. The government version was finalized at the Cabinet meeting on September 1 and submitted to the National Assembly, but it still has to go through review in the regular session. The content may change during the review, so whether it is finally settled has to be checked after it passes the National Assembly.

Q. If I have children, does everyone’s credit card deduction limit go up?

It was announced that the limit goes up depending on the number of children. For details such as which children qualify, check the NTS year-end settlement guidance or ask the person in charge at your company.

This article compiles public information for informational purposes and is not tax advice. The tax reform proposal may change during National Assembly review, and whether you qualify for a deduction and the amount depend on your personal situation, so please be sure to check with NTS Hometax and the NTS call center (126) or a tax professional.