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If your spending from January to September of this year exceeds 25% of your total annual salary, you can receive additional income deduction benefits when you use a check card instead of a credit card for the remainder of the year.
Income deduction is a concept that reduces your income subject to tax. If you receive an income deduction, you can lower your tax base (the income standard on which taxes are levied). Income deduction does not apply up to 25% of annual gross salary. This means that up to this section, there is no difference no matter what payment method you use. If the benefits of a credit card are better than those of a check card, using a credit card may be advantageous.
If your spending from the beginning of the year to present exceeds 25% of your total salary, from then on you can receive more deductions by using a check card with a higher deduction rate than a credit card. This is because the income deduction rate for credit cards is 15%, but the income deduction rate for check cards and cash receipts is 30%.
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For example, assuming that an office worker (annual salary of 60 million won) who has spent more than 25% of his total salary by spending 31 million won on a credit card from the beginning of this year to the present buys a new refrigerator worth 3 million won at the end of the year, if he uses a check card, he can purchase a new refrigerator worth 3 million won. You can receive an income deduction of 150,000 won more than with a credit card.
Income deduction limits vary depending on annual gross salary. If it is less than 70 million won, up to 3 million won is deducted, and if it exceeds it, up to 2.5 million won is deducted. However, even if you exceed this limit, you can receive additional income deductions for books, performance fees, and amounts spent on public transportation and traditional markets. At the end of the year, when there is a high possibility that the income deduction limit has been met, it is advantageous to save taxes by using traditional markets instead of supermarkets when shopping.
The National Tax Service started a year-end tax settlement preview service on the 15th. You can find out the expected credit card deduction amount by entering your working period, total salary for this year, and expected credit card usage from October to December. Based on these results, you can see in a graph the changes in total salary, determined tax amount, and tax deduction amount for a total of four years, including the past three years (2021-2023) and this year.
The tax burden relief measures included in the government’s ‘2024 Tax Law Amendment’ are not reflected in the preview service as the process for passage through the National Assembly remains. △Full tax exemption for childbirth support △Marriage tax credit of 500,000 won △Increase in credit card consumption deduction rate from 10% to 20% △Increase in deduction rate for traditional markets from 40% to 80%, etc.
The National Tax Service also provides a ‘customized guidance’ service that selects workers who are likely to have met the deduction requirements but have never received the deduction and informs them in advance of the deduction requirements, benefits, and supporting documents. For example, the National Tax Service notifies citizens who have forgotten to carry forward donations that are eligible for deduction through a KakaoTalk message. The National Tax Service stated, “Even if you receive guidance, you must determine whether or not you are eligible for deduction based on the end of the year (December 31) during the actual year-end tax settlement.”
Reporter Joo-bin Lee yes@hani.co.kr
**PAA-Focused:** Based on the interview, how would an individual with a high annual salary strategically utilize check card and credit card payments to maximize their tax deductions?
## World Today News Interview: Maximizing Your Tax Deductions
**Introduction:** Welcome to World Today News. Today, we’re delving into the intricacies of tax deductions, specifically focusing on how your choice of payment method can impact your tax bill. Joining us are two financial experts: Ms. Jane Smith, a certified financial planner, and Mr. David Lee, a tax accountant with years of experience navigating the tax code.
**Section 1: Understanding Income Deductions**
* **Interviewer:** Ms. Smith, for our viewers who may be unfamiliar, could you explain the concept of income deduction and its impact on our taxes?
* **Jane Smith:** Certainly. An income deduction essentially lowers your taxable income. This means less of your earnings are subject to taxation, ultimately resulting in a lower tax liability.
* **Interviewer:** Mr. Lee, the article mentions different deduction rates for credit cards and check cards. Can you elaborate on the differences and how they might influence spending decisions?
* **David Lee:** Absolutely. While both offer deductions, the rate for check cards and cash purchases (30%) is higher than that for credit cards (15%). Understanding this difference can empower individuals to strategize their spending to maximize their deductions.
**Section 2: Utilizing Payment Methods Strategically**
* **Interviewer:** Ms. Smith, the article highlights a scenario where exceeding a certain spending threshold could make check card usage more advantageous. Can you provide some concrete examples of how individuals can apply this knowledge to their financial planning?
* **Jane Smith:** Imagine you’ve already spent 25% of your annual salary by the end of September. If you expect significant purchases towards the year-end, switching to check card payments could potentially save you a notable amount in taxes.
* **Interviewer:** Mr. Lee, let’s say someone is close to reaching their annual deduction limit. Are there specific types of expenses that can still offer valuable deductions?
* **David Lee:** The article points out that even after hitting the limit, expenses like books, performance tickets, public transportation, and purchases from traditional markets can still be deducted. This highlights the importance of being mindful of where you spend your money during the latter part of the year.
**Section 3: Government Initiatives and Services**
* **Interviewer:** The article mentions several upcoming tax relief measures proposed by the government. Mr. Lee, how might these changes impact individuals’ planning strategies?
* **David Lee:** These proposals, including higher deduction rates for credit cards and traditional market purchases, have the potential to significantly impact how people approach their finances. It’s crucial to stay informed about the final legislation and adapt accordingly.
* **Interviewer:** Both of you, what are your thoughts on the National Tax Service’s initiative to provide year-end tax settlement previews and customized guidance?
* **Jane Smith:** These services are immensely helpful. They empower individuals to understand their tax situation, identify potential deductions they might have overlooked, and ultimately make more informed financial decisions.
* **David Lee:** Agree. I also encourage readers to utilize these services provided by the National Tax Service and consult with financial advisors to ensure they are maximizing their tax benefits.
**Conclusion:**
* **Interviewer:** Thank you both for sharing your invaluable insights. Remember, understanding the nuances of tax deductions can empower us to make smarter financial choices. We encourage our viewers to explore the resources mentioned and seek professional advice when needed.
