Every January and February, salaried workers in Korea go through the annual year-end tax settlement (연말정산) process. Often called the "13th month salary," proper preparation can result in a refund of hundreds of thousands to millions of won.
This guide covers the key points of the 2026 year-end tax settlement and shows how to use CalKit calculators to estimate your refund in advance.
📑 Table of Contents
What is Year-End Tax Settlement?
Year-end tax settlement is the process of comparing the income tax withheld from your monthly salary throughout the year with the actual tax you owe. If you overpaid, you get a refund. If you underpaid, you'll need to make an additional payment.
🧮 Withholding Tax Calculator Check your withholding amount instantly →What's New in 2026
Personal deductions for self, spouse, and dependents have been slightly increased.
Public transportation deduction rate maintained at 80%, with increased limits for cultural expenses.
Tax credit rate increased for workers earning under 80 million won in gross salary.
The credit amount per child has been increased.
Combined tax credit limit for pension savings and IRP maintained at 9 million won.
Income Deduction vs Tax Credit — What's the Difference?
One of the most confusing aspects of year-end tax settlement is the difference between income deductions and tax credits.
| Category | Income Deduction | Tax Credit |
|---|---|---|
| Concept | Reduces the taxable income base | Directly reduces the calculated tax |
| Effect | Greater savings for higher income earners | Fixed savings regardless of income level |
| Examples | Personal deductions, credit cards, housing funds | Medical expenses, education, donations, insurance |
Commonly Missed Deduction Checklist
Go through these items one by one to make sure you haven't missed anything.
01 Personal Deductions
- ✓ Check if dependents (parents, children, siblings) are registered
- ✓ Basic deduction for parents aged 60+ (annual income under 1M won)
- ✓ Basic deduction for children under 20
- ✓ Additional deduction for disabled persons
02 Credit/Debit Card Deduction
- ✓ Deduction applies to spending exceeding 25% of gross salary
- ✓ Credit cards: 15%, debit cards/cash receipts: 30% deduction rate
- ✓ Public transportation and traditional market spending have separate limits
03 Housing-Related Deductions
- ✓ Housing loan principal/interest repayment deduction
- ✓ Rent tax credit (for houseless household heads earning under 80M won)
- ✓ Housing savings deduction
04 Insurance, Medical, Education Credits
- ✓ Protection insurance premiums (up to 1M won annually)
- ✓ Medical expenses (exceeding 3% of gross salary)
- ✓ Education expenses (kindergarten through university)
05 Pension & Savings Credits
- ✓ Pension savings (up to 6M won annually)
- ✓ IRP (up to 9M won including pension savings)
- ✓ Gross salary under 55M won: 16.5% credit rate
- ✓ Gross salary over 55M won: 13.2% credit rate
06 Donation Tax Credits
- ✓ Legal donations, designated donations, religious organization donations
- ✓ 15% for first 10M won, 30% for amounts exceeding 10M won
Tips for Maximizing Your Refund
💡 5 Key Tax-Saving Strategies
Use credit cards up to 25% of gross salary, then switch to debit cards and cash receipts.
Contributing up to the limit (9M won) can save up to 1.485M won in taxes.
Don't miss deductions for parents and children who meet income requirements.
If you're a houseless household head, be sure to apply for the rent tax credit.
Check HomeTax's simplified service for any missing receipts.
Year-End Tax Settlement Schedule
15~
Start checking income/tax credit proof documents
20~
Employers collect employee data in bulk
Feb 28
Submit deduction documents to your employer
Pay
Settlement results reflected in March salary
Conclusion
The more thoroughly you prepare for year-end tax settlement, the larger your refund can be. Go through the checklist above and use CalKit's various tax calculators to estimate your taxes and refund in advance.