Complete Guide to 2025 Year-End Tax Settlement in Korea
NTS Official Guide for Maximum Tax Refund
January 2026 marks the beginning of the year-end tax settlement season in Korea, which determines the '13th-month salary' for employees. This guide provides comprehensive information on the 2025 year-end tax settlement based on official National Tax Service (NTS) data, covering everything from the simplified service schedule to tax-saving strategies for maximum refunds.
What is Year-End Tax Settlement?
Year-end tax settlement (연말정산) is a procedure where employees settle their income tax for the year. It compares taxes withheld monthly from salaries with the actual tax owed - overpaid taxes are refunded, while underpaid taxes must be additionally paid.
Key Point: The 2025 year-end tax settlement covers income earned from January 1 to December 31, 2025. While the settlement occurs in January-February 2026, the target income is from 2025.
2026 Year-End Tax Settlement Schedule
Key dates announced by the National Tax Service for 2025 year-end tax settlement:
| Date | Event | Notes |
|---|---|---|
| Nov 15, 2025~ | Tax Preview Service Opens | Estimate taxes based on Jan-Sep card usage |
| Dec 1, 2025 ~ Jan 15, 2026 | Dependent Data Consent Period | Consent for family deduction data access |
| Jan 15, 2026 (Thu) 08:00 | Simplified Service Opens | Data available on Hometax/Sontax |
| Jan 15-18, 2026 | Receipt Issuer Submission Period | Medical institutions supplement data |
| Jan 18, 2026~ | Convenient Settlement Service Opens | Direct deduction form submission available |
| Jan 20, 2026 (Tue) | Final Data Confirmation | Download after this date for accurate data |
| Jan ~ End of Feb 2026 | Submit Documents to Employer | Deadlines vary by company |
| Feb 2026 | Refund Payment | Usually with February salary |
Key Changes for 2025 Year-End Tax Settlement
1. Child Tax Credit Increased
Starting from 2025, the tax credit per child has increased by 100,000 KRW each.
| Number of Children | Previous | New Amount | Increase |
|---|---|---|---|
| 1 child | 150,000 KRW | 250,000 KRW | +100,000 KRW |
| 2 children | 350,000 KRW | 550,000 KRW | +200,000 KRW |
| 3 children | 650,000 KRW | 950,000 KRW | +300,000 KRW |
2. New Marriage Tax Credit
A new marriage tax credit has been introduced as part of measures to address low birth rates.
- Credit Amount: 500,000 KRW per person, up to 1,000,000 KRW per couple
- Applicable Period: Couples who registered marriage between 2024-2026
- Note: One-time benefit only
3. Housing Subscription Savings Deduction Limit Increased
| Item | Previous | New |
|---|---|---|
| Annual Deposit Deduction Limit | 2.4 million KRW | 3 million KRW |
| Deduction Rate | 40% | 40% |
| Maximum Deduction | 960,000 KRW | 1.2 million KRW |
4. Childcare Allowance Tax-Free Limit Increased
- Previous: Up to 100,000 KRW/month tax-free
- New: Up to 200,000 KRW/month tax-free
5. Gym Membership Deduction (New)
Gym and swimming pool fees paid after July 2025 are now eligible for income deduction.
- Deduction Rate: 30%
- Eligibility: Workers with total salary under 70 million KRW
- Note: Must pay with cash receipt or debit card
6. Hometown Love Donation
Hometown Love Donations offer one of the most efficient tax benefits:
- 100,000 KRW donation: 100% tax credit + approximately 30,000 KRW worth of local products
- Over 100,000 KRW: 16.5% tax credit
Effective Benefit: 100,000 KRW donation = 100,000 KRW tax credit + 30,000 KRW gift = 130% return
Income Deduction vs Tax Credit
Income Deduction
Reduces taxable income
Key Income Deduction Items:
- Personal exemption (self, spouse, dependents)
- Credit/debit card and cash receipt usage
- Housing subscription savings
- Housing rental loan principal and interest repayment
- Personal pension savings
Tax Credit
Directly reduces calculated tax
Key Tax Credit Items:
- Child tax credit
- Marriage tax credit (new)
- Pension account tax credit (pension savings, IRP)
- Medical expense tax credit
- Education expense tax credit
- Donation tax credit
- Rent tax credit
Credit Card Deduction Strategy
Credit card deduction applies to amounts exceeding 25% of total salary.
| Payment Method | Deduction Rate | Notes |
|---|---|---|
| Credit Card | 15% | Base rate |
| Debit Card/Cash Receipt | 30% | Double the rate |
| Traditional Market | 40% | Additional benefit |
| Public Transportation | 40% | Additional benefit |
Tax-Saving Tip: Use credit cards up to 25% of your total salary (for points/rewards), then switch to debit cards or cash receipts for the remainder to maximize deductions.
Pension Account Tax Credit
Tax credits are available for deposits into pension savings and IRP (Individual Retirement Pension).
| Total Salary | Credit Rate | Pension Savings Limit | Total Limit (incl. IRP) |
|---|---|---|---|
| Under 55 million KRW | 16.5% | 6 million KRW | 9 million KRW |
| Over 55 million KRW | 13.2% | 6 million KRW | 9 million KRW |
Maximum Tax Savings:
- Under 55 million KRW salary: 9 million × 16.5% = 1,485,000 KRW
- Over 55 million KRW salary: 9 million × 13.2% = 1,188,000 KRW
Using the Hometax Simplified Service
Access Methods
- Hometax Website: https://hometax.go.kr
- Mobile Sontax: Run the Sontax app
- Login: Joint certificate, financial certificate, or simple authentication (Kakao, PASS, Naver, Samsung Pass, etc.)
TIP: Download data after January 20 to get finalized data including corrections from medical institutions.
Tax-Saving Strategies for Maximum Refund
Strategy 1: Optimize Card Usage
- Use credit cards up to 25% of salary (collect points/rewards)
- Use debit cards/cash receipts beyond 25% (30% deduction rate)
- Actively use traditional markets and public transportation (40% rate)
Strategy 2: Maximize Pension Savings + IRP
- Pension Savings: Deposit up to 6 million KRW annually
- IRP: Add 3 million KRW more (total 9 million KRW)
- Get up to 1,485,000 KRW tax credit annually
Strategy 3: Utilize Hometown Love Donation
- 100,000 KRW donation = 100,000 KRW tax credit + ~30,000 KRW gift
- Effective return rate of 130%
Strategy 4: Check Dependent Deductions
- Verify if parents are registered as dependents
- Coordinate with siblings on who claims parent deductions
- Check eligibility for additional disability deductions
Conclusion
Year-end tax settlement may seem complex, but with advance preparation and careful attention to detail, you can receive more refunds than expected. Use this guide as a reference to maximize your benefits in the 2025 year-end tax settlement!
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