I Did My Year-End Tax Settlement Myself for the First Time: Here's a Summary
I always thought the company took care of it every year, but because of changes last year I ended up doing it myself. I've summarized the parts that confused me along the way.
1. Card deductions are calculated based on gross salary
I learned for the first time that it's based on gross salary, not annual salary. Deductions start on the amount spent above 25% of gross salary, so spending a lot at the end of the year is actually almost meaningless.
2. For the rent deduction, you must check the head-of-household requirement
In some cases, choosing separate taxation is advantageous, and in others, comprehensive taxation is better. I thought separate taxation was always better, but after consulting, it turned out not to be.
3. Pension savings and IRP have different limits
- Pension savings: 6 million won
- Combined including IRP: 9 million won
I confused these and almost put 9 million into pension savings only. Only after realizing it was a combined limit did I rework the allocation.
4. Medical expenses: pool them under dependents
If there are items not covered by your parents' indemnity insurance, it's advantageous to concentrate them there. However, amounts exceeding the limit cannot be carried over, so you need to settle them that year.
5. Result
Because I didn't know last year, I missed out on about 300,000 won. Now that I know, I think I can handle a bit more next year. If there's anything I misunderstood, I'd appreciate it if you could point it out.
9 answers
Oh, I didn't know that.
I totally relate to #1 lol. It’s a bit sad seeing people cram all their card spending into December every year.
Is there a source?
It's true that medical expenses don't carry over, so rather than cramming hospital visits into December, it's better to sort out items you haven't claimed under indemnity insurance throughout the year in advance. For your parents, make sure to check when they signed up for indemnity insurance and what it covers. I didn't know that and just submitted my parents' dental costs to their indemnity insurance, only to lose it all to the deductible.
Ah, I see.
Isn't it a bit of an overstatement to say that cramming spending to reach 25% of total salary is meaningless? Even if there's no tax deduction benefit, spending heavily in December clearly makes sense for meeting card spending requirements. Talking only in terms of tax deductions makes it sound disconnected from real life.
The head-of-household requirement is seriously important. I live with my parents, and because my father is the head of household, I had no idea I wasn’t getting the monthly rent deduction at all and wasted 3 years. I’m going to check whether I can change the head of household even now. Since this post reminded me, I’ve already booked a consultation at the tax office ㄷㄷ
I’m not so sure about #2. Whether separate taxation is advantageous ultimately depends on your total income and whether you have other income sources, so writing it this vaguely could easily lead to misunderstandings. To be helpful, you should include cases showing under what conditions which option was better.
Pension savings 6 million / IRP combined 9 million—this is a genuinely confusing part. Last year, I tried to put 9 million into pension savings and got an earful from my tax accountant. In the end, I split it into 6 million in pension savings + 3 million in an IRP. But since IRPs almost never allow early withdrawal, put that 3 million in only as money you can truly leave untouched. When you urgently need a lump sum, having it locked up in an IRP is really frustrating.