The Credit Card Income Deduction Starts Only Above 25% of Your Salary -- 15% for Credit Cards, 30% for Debit Cards, and How to Check Your Threshold in October

The card deduction starts only above 25% of total salary

According to the NTS, of the combined spending on credit cards, debit cards, prepaid cards and cash receipts, only the part exceeding 25% of total salary is multiplied by 15 to 40% and deducted from income. If your total salary is 40 million won, spending up to 10 million won earns no deduction no matter how much you spend, and only what you spend above that counts. This base amount is commonly called the minimum spending amount.

Rates differ by type: 15%, 30% and 40%

The rates set by law are 15% for credit cards, 30% for debit and prepaid cards and cash receipts, 40% for traditional markets and 40% for public transportation. Culture and sports spending, such as books, newspapers, performances, museums, art galleries and movie tickets, is at 30%. In other words, for the same 100,000 won, a credit card counts 15,000 won toward the deduction and a debit card counts 30,000 won. That figure is the deduction amount; the tax you actually save is that amount multiplied by your own tax rate.

The cap changes around a total salary of 70 million won

The basic cap is 3 million won for a total salary of 70 million won or less and 2.5 million won above that. The statute also contains higher caps by number of children: for 70 million won or less, 3.5 million won with one child and 4 million won with two or more, and above that 2.75 million won and 3 million won. Check the HomeTax year-end settlement guide once more for the year from which these apply.

The 25% threshold is filled with credit card spending first

The NTS calculation principle works like this. If credit card spending is at least 25% of total salary, the threshold is filled with credit card spending and only 15% applies to the card portion. If credit card spending falls short, the gap is filled by cash receipts and debit cards, and 30% applies to that portion. So someone who has already passed the threshold gains more by using debit cards or cash receipts for the rest of the year, while someone who is still short will see any card spending go toward the threshold.

Working through the numbers

Suppose a person with a total salary of 40 million won spent 15 million won on a credit card and 3 million won on a debit card. The threshold is 10 million won and credit card spending exceeds it, so the threshold is filled by the credit card; the remaining 5 million won at 15% gives 750,000 won, and 3 million won of debit card spending at 30% gives 900,000 won. The income deduction totals 1.65 million won, within the 3 million won cap. This is a hypothetical example of the method; check your own spending record for real figures.

Not all spending qualifies

As set by law, car purchases, insurance premiums and taxes are excluded. Credit card spending counts only during the period you worked, so spending before you joined or after you left cannot be deducted. The simplified year-end data shows what issuing institutions submitted as is, so it can include items that do not qualify, and checking the requirements is your own responsibility. When adding family members' spending, confirm in the guide that they are basic-deduction dependents and meet the income requirement.

In October, compare your spending with the threshold

Add up your credit card and debit card spending from January to now in your card apps and compare it with 25% of your total salary. Your total salary can be found in last year's settlement result or on a pay slip. If you have already passed the threshold, it is better to use debit cards and cash receipts for the last three months and to favor high-rate places such as traditional markets and public transportation. If you are still far below it, do not force spending; look at other deductions first, because the money you spend is larger than the tax benefit you would gain.

When you pay cash, ask for a cash receipt and give your mobile number or registered card number. Cash spending without a receipt does not appear in the deduction data. Trying to check everything at year-end makes it hard to recover missed items, so adding up your spending once a month also tells you in advance when you will cross the threshold.

Seeing it alongside other deductions helps you miss less

The card deduction is only one item in year-end settlement. See all items in the year-end settlement deduction checklist and pension savings and IRP in the 9 million won tax credit limit post. If you use cards a lot, also check the card point expiry deadline and the unclaimed refund lookup. This post is general information and does not guarantee any individual tax amount. Confirm exact figures with the NTS call center (126) or a tax professional.