1. the year-end tax paradigm shift and why it matters in 2026
every January and February, every working income earner in South Korea prepares for the year-end tax settlement, either looking forward to the '13th paycheck' or dreading the 'tax bomb'. the '2025 Attributable Year-End Settlement', which will take place in early 2026, is expected to be more than just a tax settlement process, but an important milestone in which the government's low birthrate and aging population and domestic demand promotion policies are reflected in the tax law. in particular, the amendments are characterized by an unprecedented increase in support for marriage, childbirth, and child rearing, as well as a new deduction for gym fees to improve people's health.
based on the 2025 Tax Law Amendment, this report analyzes in-depth the major changes that will be applied to the 2026 tax year-end settlement and suggests the optimal tax saving strategies according to the life cycle of workers, income brackets, and family composition. readers will be able to go beyond the information to develop a concrete action plan to maximize tax benefits for the rest of the year.
2. summary of key themes and key changes in the 2025 Tax Cuts and Jobs Act
the key themes of the 2026 year-end settlement can be summarized as "responding to demographic changes (marriage and fertility)" and "improving the quality of life (health and culture)". the government has introduced a new tax credit to address the declining marriage rate and ultra-low birthrate, and has raised the limits of various deductions to ease the burden on households in times of high inflation.
2.1 Summary table of major changes
categorykey Changeswhen/Conditionsremarks marriage Tax Credit tax credit of up to KRW 1 million for a married couple (KRW 500,000 per person) when filing for marriage 2024.1.1~2026.12.31 Marriage registration
once in a lifetime, regardless of first/remarriage, no age limit
child tax credit increased deduction by 100,000 won per child (250,000/30,000/40,000 won) from 2025 attribution
for children aged 8 to 20
credit card deduction added 30% deduction for pool and gym fees 2025.expenses after 7.1
total salary of 70 million won or less
hometown love donation annual limit of KRW 5 million → KRW 20 million 2025.after 1.1
fully deductible up to KRW 100,000, 16.5% of excess
homebuilding Savings allowed deduction for spouses of non-housing heads of household (income up to 70 million won) from 2025 attribution
40% of contributions (capped at $3 million per year)
traditional Market Deduction increase deduction to 80% for expenditures in the second half of the year second half of 2024 to 2025
temporary increase to stimulate consumption
3. in-depth analysis I: Unconventional tax support to respond to the population crisis
3.1 New Marriage Tax Credit: A gift of 1 million won for newlyweds
the most prominent change in the tax law revision is the establishment of the Marriage Tax Credit. this is a direct tax incentive to help ease the financial burden of marriage and encourage marriage.
3.1.1 Inclusivity of the credit and conditions
unlike previous youth incentives, which had strict limits on age and income, the Marriage Tax Credit significantly lowers the threshold.
period: Couples who register their marriage between January 1, 2024 and December 31, 2026 are eligible.
age and income agnostic: The credit is available regardless of whether the bride and groom are older or younger, or have higher or lower incomes. this reflects the growing trend toward later marriages.
inclusive of first and second marriages: The credit is limited to once in a lifetime, but it is also available for first and second marriages to ensure equity.
3.1.2 Analyzing the effect of tax credits
it is important to note that the tax credit is a 'credit' rather than a deduction. a deduction is an indirect benefit that reduces the taxable base, while a credit is a direct benefit that reduces the calculated tax itself.
husband's taxes are reduced by 500,000 won + wife's taxes are reduced by 500,000 won = 1 million won in total.
what if the determined tax is less than the credit? In general, the credit is deducted only to the extent of the determined tax, but in the case of a dual-income couple, it is deducted from each other's determined tax, so it is expected that most workers will fully enjoy the benefit.
3.1.3 Strategic Timing of Marriage Filing
many couples put off filing for marriage even after the wedding. however, you must be legally married by December 31, 2026 to take advantage of this benefit. especially for couples getting married at the end of 2025, filing in December will allow them to take advantage of this benefit when they file their taxes in February 2026.
3.2 Expanding the Child Tax Credit: A real boost for families with multiple children
to address the declining birthrate, the tax incentives for raising children have also been strengthened. in response to criticism that the existing deduction amount was not enough to cover the realistic cost of childcare, the deduction amount was increased by 100,000 won per child.
3.2.1 Detailed comparison of deduction amounts
number of childrenexisting deductiondeductible after change (attributable to 2025)increase 1 child 150,000 250,000 won +100,000 KRW 2 persons 350,000 (15+20) 55 (25+30) +200,000 KRW 3 persons 650,000 KRW (15+20+30) 95 (25+30+40) +300,000 KRW 4 players 95,000 KRW 135 +40
notes: after the third child, each additional child costs 400,000 won.
3.2.2 The need to close the 6 and under vs. 8 and over deduction blind spot
the child tax credit is basically for children over the age of 8 (school age). preschoolers under the age of 7 have been excluded to prevent duplication of benefits as they receive child allowance. however, this revision is expected to significantly reduce the tax burden for families with children in elementary school and above. a family with three children will receive a tax reduction of nearly 1 million won, which is equivalent to the aforementioned marriage tax credit every year.
3.3 Targeting niches in maternity and childcare support: postpartum nurses and male parental leave
3.3.1 Abolishing the income threshold for the postpartum caregiver tax credit
previously, only workers with a total salary of 70 million won or less were eligible for the medical expense tax credit for postpartum care (capped at 2 million won). However, starting in 2024, this income requirement will be abolished, allowing all workers, regardless of income level, to receive a deduction of up to 2 million won per birth. this reflects the fact that postpartum care has become a necessity rather than an option.
3.3.2 Supporting the employment of men with career breaks
male workers who leave their jobs to raise children and rejoin SMEs will receive the same income tax breaks as women. this is an exceptional benefit of 70% income tax reduction for three years from the date of employment. this is to encourage men to participate in childcare and reduce the fear of career interruption.
4. in-depth analysis II: Expanding consumption deductions to promote work-life balance and domestic demand
4.1 The 'gym and pool' deduction: Better health, lower taxes
in order to improve the health of workers and revitalize the gym industry, the credit card deduction for gym and pool fees has been newly included. this expands the scope of the 'cultural expense deduction' that was previously applied to books, performances, museums, art galleries, and movie tickets.
4.1.1 Applicability and timing
employees: Workers with a total salary of 70 million won or less.
facilities: Swimming pools andgymnasiums (gyms) registered under the Act on the Installation and Use of Sports Facilities.
deduction rate: 30% of the fee.
when it takes effect: effective for expenditures made on or after July 1, 2025.
4.1.2 'Deduction blind spots' to watch out for (exclusions)
not all exercise expenses are deductible. these are expected to cause the most confusion when tax season rolls around in 2026.
pilates and yoga: These are often not classified as gyms under the current law and are likely not deductible.
private PT (tuition): for non-facility fees, the guidance needs to be clarified, but initial discussions have categorized them as excludable. however, there is room for practical interpretation, such as if the fee is included in the facility fee.
equipment: Rental fees for sportswear, swimwear, sneakers, etc. are not deductible.
4.1.3 Strategic Spending Timing
if you plan to cancel your one-year gym membership, it is advantageous to pay after July 1, 2025. this is because payments made in the first half of the year will only be eligible for the regular credit card deduction (15%), while payments made in the second half of the year will be eligible for the cultural expense deduction (30%).
4.2 Hometown Donation Program: Combining the Increased Limit with Tax Tech
the Hometown Donation Program is a system that allows you to donate to local governments other than your own address and receive tax deductions and gifts in return. it has been in the spotlight as a 'tax+tech' tool since its inception, but the limit of 5 million won per year has been pointed out as a disappointment.
4.2.1 Implications of quadrupling the limit
starting in 2025, the donation limit will be dramatically increased to KRW 20 million per year.
100,000 won orless: 100% full tax credit (same as before).
over KRW 100,000: 16.5% tax credit.
giftsin return: 30% of the donation in local specialties.
4.2.2 Strategies for high-income earners
high-income earners have a higher marginal tax rate and can afford to deduct more, so they should take advantage of the Hometown Love Donation. for example, if you donate KRW 1 million:
tax deduction: KRW 100,000 (100%) + KRW 148,500 (KRW 900,000 × 16.5%) = KRW 248,500
gift in-kind: $300,000 worth
total benefit: KRW 548,500 (actual contribution of KRW 451,500)
this is a rewarding way to donate and get more than 50% of the benefits back, so it's definitely something to consider if you want to increase your year-end tax refund.
5. in-Depth Analysis III: Housing Stability and Affordable Financing
5.1 Expand the Down Payment Savings Deduction
to support the dream of owning a home, the tax deduction for comprehensive housing savings has been expanded. previously, only the employee who is the head of the household could claim the deduction, but from now on, the spouse of the head of the household with a gross salary of 70 million won or lesscan also claim the deduction.
conditions: The spouse must have a gross salary of 70 million won or less, and the annual contribution limit is 3 million won.
deductionrate: 40% of the payment is deductible.
this is an improvement to the inconsistency where the spouse of a dual-income couple who is not the head of the household could not benefit from the subscription account. now, no matter who makes the contribution, as long as they meet the income requirements, they will be able to take advantage of the credit.
5.2 Rent Tax Credit and Mortgage Interest Deduction
in an era of high interest rates and high prices, housing costs are a major concern. the rent tax credit is a system that deducts 15% to 17% of the monthly rent for householders with a gross salary of 70 million won (60 million won gross income) or less.
akey checkpoint: you don't need the landlord's consent. all you need is a copy of the lease agreement, a copy of your resident registration, and proof of rent transfer (such as a bank transfer receipt).
claims: If your landlord has been too clever and waited until your lease was up for renewal, you can file a "claim" within five years to get all of your past deductions back in one lump sum.
6. simulate a "push" vs. "pull" strategy for dual-income couples
year-end tax preparation for dual-income couples is a game of strategy. it's not just a matter of shoving everything to the higher earner. it requires a sophisticated allocation that takes into account income tax brackets and the nature of the deductions (e.g., minimum spending thresholds).
6.1 Credit card deductions: the 'floor' game
credit card deductions start to be deductible when you spend more than 25% of your gross pay.
strategy 1 (when there is a large income gap): it is advantageous to use the lower-earning spouse's card heavily to quickly cross the 25% of gross salary threshold. the lower earner has a lower threshold.
strategy 2 (when you're both big spenders): if you both spend enough to go over the threshold, consider using the card of the spouse in the higher tax bracket (higher salary) to maximize the tax savings (tax rate differential) of the deduction.
note: Spousal card expenses are not combined and are deducted separately based on the cardholder. it's also important to note that even family cards are deducted on a "beneficiary" basis, not the payer.
6.2 Medical expense deductions: "crowding out" the lower-earning spouse
the medical expense tax credit is a 15% deduction (higher for fertility treatments, etc.) for expenses in excess of 3% of gross pay.
strategy: It's advantageous for the spouse with the lower gross pay to pay for medical expenses. the 3% threshold is lower, so the amount you can deduct is greater.
practical tip: Medical expenses can also be combined with expenses for dependents, regardless of age or income. so if you're a dual-income couple, it's a good idea to pay for your family's medical bills on the card of the lower earner. however, while you can deduct medical expenses for your spouse, you shouldn't double-deduct medical expenses for yourself.
6.3 Personal exemptions: "taxing" high earners
the basic dependent exemption (1.5 million won per person) is absolutely favorable to high-income earnerswith higher income tax rates. this is because it lowers the tax base and reduces the number of brackets in which higher tax rates (e.g. 24%, 35%, etc.) apply.
7. essential checklists and documents to complete your '13 paycheck'
while the IRS's HomeTax Simplified Service is evolving every year, there are still some "blind spots" that aren't automatically collected and need to be taken care of by workers. if you miss them, you could be missing out on hundreds of thousands of dollars in refunds.
7.1 Checklist of documents you need to gather (Checklist)
itemdocumentation and sourcenotes eyeglasses and contact lenses verification/receipt for vision correction (optometrist)
many opticians do not submit to the streamlined service. must be clearly stated for vision correction
school uniforms receipt for school uniform (school uniform store) for children of middle and high school students (up to KRW 500,000 per year) school fees for pre-school children certificate of payment of cram school fees (cram school)
can include one to two months of cram school fees before entering elementary school
donations donation receipts (religious organizations, donation sources) some organizations, such as religious organizations, may not be linked to the system. may require a copy of your tax ID card rent tax credit copy of lease agreement, rent transfer, etc
change of address (move-in report) required
maternity care receipts for maternity care
submit in person if missing simplified documents
certificate of Disability certificate of disability (medical institution, administrative welfare center)
includes critically ill patients who require full-time care (e.g., cancer patients). developmental rehabilitation services certificate is also acceptable
7.2 Details of the eyeglasses deduction
the cost of eyeglasses or contact lenses is included in the medical expense deduction, up to 500,000 won per person per year.
what about sunglasses? Sunglasses or colored lenses for cosmetic purposes, not for vision correction, are not deductible.
purchases on behalf of a family member: If you buy eyeglasses for a dependent, you can deduct them, but only if the dependent qualifies for the basic deduction (meets age and income requirements). however, the age/income restrictions may be relaxed under the medical expense exception, so be sure to check.
8. conclusion and suggestions: Prepare now, not at the end of the year
the 2026 tax year (attributable to 2025) heralds major changes to encourage marriage and childbirth and support healthy living. a $1 million marriage tax credit, an expanded child tax credit, and a new gym tax credit are just a few of the benefits you won't want to miss.
however, the prerequisite for all of these benefits is to be proactive.
marriedcouples should strategize the timing of their marriage registration.
exercise enthusiastsshould consider registering after July, or make sure their facilities are deductible.
dual-incomecouplesshould discuss strategies for card use and dependents based on salary differences.
if you take steps now to review your spending patterns this year, adjust your credit and debit card mix for the rest of the year (30% deduction), or increase your pension savings (13.2% to 16.5% deduction) contributions, your February 2026 paycheck could look a lot different. remember, tax season isn't just about getting your taxes back, it's about taking stock of your finances and planning for the future.
[Appendix] Frequently Asked Questions (FAQs)
Q1. Will the gym deduction apply to all January 2025 visits?
A. No. It applies to expenditures made on or after July 1, 2025, when the law goes into effect. for spending in the first half of the year, only the regular credit card deduction (15%) will apply.
Q2. Can I deduct yoga or Pilates classes?
A. In principle, only gyms and swimming pools are eligible under the Physical Fitness Facilities Act. most yoga and Pilates schools do not fall under this and are likely to be ineligible for the deduction. You should check with the facility before enrolling.
Q3. Is the marriage tax credit only available to one of the couple?
A. No. Both husband and wife will receive a tax credit of 500,000 won each, for a total tax reduction of 1 million won.
Q4. I got married last year, but I didn't register my marriage. How long do I have to wait to get the deduction?
A. You can register your marriage between January 1, 2024 and December 31, 2026. if you file this year, you'll be able to take the benefit when you file your taxes early next year.
Q5. I want to do a healthcare reimbursement plan, can I use my spouse's card to pay?
A. No, you can't. the rule is that the medical expense tax credit is only deductible for expenses "incurred by the worker," so if you're a husband, you'll need to pay with your husband's card, and if you're a wife, you'll need to pay with your wife's card. however, the "deductible" includes the spouse, not the "payment method." (Edit: Medical expenses are deductible if they're paid for someone who qualifies for the basic deduction without age/income restrictions, so a husband can deduct medical expenses paid for his wife (who also has income). however, the wife must not be double deducted for her own medical expenses)
Q6. What are the limits for pension savings and IRPs?
A. Pension savings are tax deductible up to KRW 6 million per year and IRPs up to KRW 9 million. depending on your income bracket, you can get back 13.2% or 16.5%, making it one of the most powerful tax saving products available.