The National Tax Service (NTS) has released a comprehensive guide to help employees avoid common mistakes in the 2025 year-end tax settlement. Failure to accurately verify deduction requirements can lead to excessive claims, resulting in additional tax payments and penalties. Key areas prone to errors include dependent deductions, rent, housing loans, and medical expenses. The NTS provides detailed resources and a consultation center to assist taxpayers in navigating these complexities.
Dependents with annual income exceeding KRW 1 million (or total salary over KRW 5 million for wage income only) are not eligible for basic deductions in 2025. Double claims for dependents by dual-income couples or siblings are prohibited, and those exceeding the income threshold cannot receive additional deductions for credit card use, insurance, education, or donations. Rent tax credits are denied if the taxpayer owns more than one home, fails to register their address, or does not actually reside in the rented property. Housing loan deductions require strict conditions, such as being the head of a non-homeowner household and matching the names on the property and loan. Loans for homes valued over KRW 600 million are excluded.
Only actual medical expenses paid are eligible for tax credits, excluding any reimbursements from insurance or refund programs. The NTS conducts annual reviews of tax filings to identify excessive deductions, with over 80,000 employees audited in 2023, many of whom faced additional taxes and penalties. The FAQ section addresses practical issues such as dependents exceeding income limits, duplicate claims for children by dual-income couples, mismatched names on housing loans, rent deduction requirements, and who can claim medical expenses.
Employees preparing for year-end tax settlement should proactively review the NTS guidance and consult with the help center to avoid common errors. Careful verification of supporting documents and eligibility is crucial to prevent penalties from duplicate claims, income threshold breaches, or mismatched names. While the tax settlement process is complex, thorough preparation can minimize unnecessary tax burdens. With the NTS expected to strengthen its oversight, staying updated with the latest information is increasingly important.
The NTS’s targeted guidance on frequent tax settlement errors significantly reduces compliance risks for employees. Enhanced data-driven audits and post-filing checks contribute to greater transparency and trust in the tax system. Integrating AI-powered tools for real-time eligibility checks and automated guidance could further improve taxpayer convenience and accuracy in future filings.