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The government says it will return income tax of up to 370,000 won at the end of the year. In April-July, the credit card income deduction rate temporarily increased (15 → 80%). Will you have to scratch the card a little more for July? Well maybe the opposite.
Blinds stock
# 80% deduction for all industries
= The ‘Amendment to the Special Tax Restriction Law’ approved by the National Assembly on the 30th of last month is to increase the deduction rate of the amount of the card used in all industries in Korea from April to July to 80%. Existing deduction rates were 15% for credit cards and 30% for check cards, and double applied temporarily in March (30% credit, 60% check).
= Even if the deduction rate increases, the deduction limit remains the same. If the annual salary is less than 70 million won, the card’s income deduction limit is 3 million won per year. The credit card deduction only applies to the amount spent more than 25% of the total salary.
= Between the deduction rate between April and July, many workers enjoyed the tax saving effect.
Suppose, for example, that worker A with a total salary of 50 million won uses only a credit card. If you pay 15 million won a year for each card for 1.25 million won per month, your deduction for this year is 2 million won. This is the result of subtracting 25% (12.5 million won) from the total salary of the card amount (15 million won) and applying 80% of the deduction rate from April to July to the remaining amount (2.5 million won).
= The tax actually returned by the worker is ‘deduction amount × 15% income tax rate’. Therefore, A’s tax benefit is 300,000 won (2 million won x 15%). Compared to last year (5,250 won), where the card’s deduction rate was 15%, it’s pretty solid.
# Coverage deduction limit
What is the effect of the increased credit card deduction rate from April to July? Chart = Reporter Jaemin Shin
= Does the card use a lot to increase the tax saving effect? There is not necessarily a deduction limit (3 million won).
= As the deduction rate increased from April to July, it became much easier to fill the deduction limit. If the total salary is 50 million won, the deduction amount would have to be 3 million won last year just spending 32.5 million won a year on a credit card. On the other hand, this year, even if you use only 1625 million won a year, the deduction limit is 3 million won (assuming you spend the same amount each month).
# Prepaid induction? All right
= The Ministry of Strategy and Finance explained that this policy is “induce prepayment”. This means that the money to be used in August-December must be withdrawn in advance in April-July, when the deduction rate is high.
= But it could actually be the opposite. If spending is above a certain level, even if the consumption amount is reduced from April to July, which has a high deduction rate, the tax saving effect can be maximized.
What happens if you spend 2 million won per month and reduce it to 700,000 won per month from April to July? Chart = Reporter Jaemin Shin
= Gross salary 50 million won Consider the case where worker B spends 2 million won per month and reduces spending to 700,000 won per month for four months from April to July (paying 18.8 million won per year). If it was last year, the tax returned to B through the credit card deduction is only 140,000 won. However, this year, thanks to the policy of increasing the deduction rate, the maximum amount is 450,000 won.
= What if Jarin Gobi C, who spent only 500,000 won a month, scratches himself every 2 million won a month in April-July for an income deduction? Unfortunately this is not the case. If the annual card payment (12 million won) does not exceed 25% of the total salary (12.5 million won), you are not eligible for deductions.
= It’s good to cut taxes in the end, but for this, there is little reason to increase consumption in April-July.
Reporter Han Ae-ran
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