How to Maximize Your Year-End Tax Refund in 2026 — 7 Tax-Saving Strategies for Salaried Workers

• Overlooking medical, education, and donation deductions can cost the average household 300,000-800,000 KRW a year

Why Do Some People Get Refunds in the Millions at Year-End? Every January and February, salaried workers ask one another, "How much did you get back this year?" Two people earning the same salary can still end up with very different results: one might receive 500,000 KRW, while another gets 2 million KRW. The gap usually comes down to how well you understand the tax structure. Year-end tax settlement reconciles the tax withheld from your salary during the year with the tax you actually owe. When you use income deductions and tax credits properly, you reduce your taxable base and increase your refund. Below are 7 core tax-saving strategies for the 2026 settlement (covering 2025 income), including the latest system changes.

Understanding the Basics of Year-End Settlement Before estimating your refund, it helps to understand how the final tax bill is calculated.

Total Salary − Earned Income Deduction = Earned Income Earned Income − Total Income Deductions = Taxable Base Taxable Base × Tax Rate = Calculated Tax Calculated Tax − Total Tax Credits = Final Tax Owed Final Tax Owed − Tax Already Paid = Refund (or Additional Payment) Income deductions reduce the income that is subject to tax, which can lower the rate applied to you. Tax credits are deducted directly from the calculated tax. In most cases, tax credits feel more immediate because they reduce the bill one-for-one.

2026 Earned Income Tax Rate Table | Taxable Base | Rate | Progressive Deduction |

Strategy 1: Maximize Pension Savings and IRP Tax Credits This is one of the most powerful tax-saving tools available to salaried workers. You receive a tax credit based on your combined contributions to pension savings and IRP (Individual Retirement Pension). | Total Salary | Credit Rate | Annual Contribution Limit | Max Tax Credit |

• Additional IRP contributions: up to 3 million KRW extra (combined cap of 9 million KRW)
• Monthly contribution needed for 1.48 million KRW refund: 750,000 KRW One important caveat: to keep the tax benefit, pension savings generally need to be received as an annuity after age 55. Early withdrawal triggers a 16.5% other-income tax penalty.

Strategy 2: Choose Debit Cards and Cash Receipts Over Credit Cards Credit and debit card income deductions apply only to spending that exceeds 25% of your total salary. | Payment Method | Deduction Rate | Annual Cap |

Strategy 3: Don't Miss the Medical Expense Tax Credit Medical expenses qualify for a 15% tax credit on amounts exceeding 3% of your total salary. Example (40 million KRW total salary):

• Threshold: 40 million × 3% = 1.2 million KRW
• If medical spending is 3 million KRW, deductible amount: 3 million − 1.2 million = 1.8 million KRW
• Tax credit: 1.8 million × 15% = 270,000 KRW refund Qualifying medical expense items:
• Hospital bills and pharmacy medication costs
• Glasses and contact lenses (cap of 500,000 KRW per person)
• Hearing aids and assistive devices for the disabled
• Postpartum care center fees (cap of 2 million KRW)
• Fertility treatment: 30% credit rate (2x preferential) One commonly missed opportunity is combining family medical expenses. A worker may also claim medical expenses paid for a spouse or dependents, as long as the dependents have annual income under 1 million KRW.

Strategy 4: The Three-Pack of Housing-Related Deductions If you do not own a home, or you own only one, housing-related deductions can make a meaningful difference. Housing Subscription Savings Income Deduction:

• Available to non-homeowner heads of household with total salary of 70 million KRW or less
• 40% income deduction on annual contributions (cap of 2.4 million KRW)
• Maximum savings: 2.4 million × 15% rate = 360,000 KRW Housing Rental Loan Principal & Interest Repayment Deduction:
• Non-homeowner heads of household receive a 40% income deduction on jeonse loan repayments
• Cap: 3 million KRW per year
• Maximum income deduction: 3 million KRW Long-Term Mortgage Loan Interest Income Deduction:
• Mortgage interest deduction for single-home owners
• Standard market price under 600 million KRW, with fixed-rate and non-grace-period repayment required
• Cap: up to 20 million KRW per year (fixed + non-grace-period)

Strategy 5: Claim Every Eligible Education Expense You can claim a 15% tax credit on education expenses for yourself and your dependents. | Recipient | Deduction Cap | Tax Credit |

• School meal fees, after-school program fees
• English kindergarten and daycare fees
• Tuition for credit bank programs and cyber universities (self only)
• Vocational training costs

Strategy 6: Donation Tax Credits Donations carry high credit rates, which makes them especially useful for year-end tax planning. | Donation Type | Credit Rate | Cap |

Strategy 7: Monthly Rent Tax Credit (For Non-Homeowner Tenants) This appeared earlier, but it is important enough to treat as a core year-end settlement item. - Total salary 55 million KRW or less: 17% credit rate, up to 1.7 million KRW refund per year

• Total salary 70 million KRW or less: 15% credit rate, up to 1.5 million KRW refund per year
• Over 70 million KRW: no deduction A tenant paying 850,000 KRW or less per month, with total salary of 55 million KRW or less, can claim 1.7 million KRW per year from this credit alone. How to apply:
• Submit your rental contract + bank transfer records (or receipts) during company year-end settlement
• You can also apply retroactively during May comprehensive income tax filing (up to 5 years back)

Comprehensive Year-End Tax Savings Simulation For a salaried worker with total salary of 45 million KRW, optimal use could look like this: | Deduction Item | Contribution / Spending | Tax Savings |

FAQ

Q1. What if I missed filing for year-end settlement?

You can file retroactively through a correction request during the May comprehensive income tax period, within 5 years. Refunds going back to 2020 income are still eligible. You can apply at a tax office or online through Hometax.

Q2. Which spouse should claim the dependent deduction?

The higher-earning spouse usually benefits more from claiming dependents because they are taxed at a higher rate. The higher the marginal tax rate, the greater the savings. Note: dependents must have annual income under 1 million KRW, or 5 million KRW if their income is solely from employment.

Q3. Pension savings funds vs. pension savings insurance — which is better?

The tax credit is the same for both. From a return perspective, pension savings funds can invest in ETFs and tend to offer better long-term growth potential. Pension savings insurance guarantees principal but generally delivers lower returns. For workers in their 30s and 40s, pension savings funds are usually the better fit.

Q4. Can I contribute to an IRP (Individual Retirement Pension) before retirement?

Yes. You can contribute freely while still employed. In addition to receiving severance pay, many workers now use IRPs specifically for tax credits. You can contribute up to 18 million KRW per year, but the tax credit applies only up to the combined 9 million KRW limit with pension savings.

Q5. How should dual-income couples split medical expenses?

Medical expense deductions apply only after expenses exceed 3% of total salary, so concentrating expenses under the lower-earning spouse can lower the threshold and increase the deductible amount. However, the person who actually paid the expenses must be the one claiming the deduction.

Q6. When does year-end settlement result in additional payment owed?

Additional payment can occur when dependents change (children becoming independent, parents earning income), side income is added (multiple jobs), salary rises significantly year over year, or deductions are missed. Workers who changed jobs mid-year should be especially careful to combine earned income from their previous employer.

💡 Real-World Insights Many blogs simply list deduction items, but what really drives your refund is contribution timing and spousal allocation strategy. According to the National Tax Service's 2024 Statistical Yearbook, the average refund is only about 770,000 KRW because many workers either rush to make a lump-sum pension savings contribution in December or fail to claim all medical expense deductions due to missing receipts. In practice, splitting a 9 million KRW pension savings contribution into 750,000 KRW monthly auto-deposits from January can lower your average ETF purchase price, potentially adding 300,000-500,000 KRW in annual investment returns on top of the 1.48 million KRW tax credit. For dual-income couples, assigning medical expenses to the lower-earning spouse (to lower the 3% threshold) and having one spouse pass the 25% credit card threshold before the other spouse takes over can produce an extra 400,000-800,000 KRW per year compared with simply splitting expenses evenly. Finally, because the monthly rent tax credit allows correction requests up to 5 years back, anyone who missed rent claims since 2020 can apply through Hometax now and potentially recover millions of KRW. This is often the most practical refund opportunity. --- If you need additional year-end calculations, try the tools below.

• Real Estate Acquisition Tax Calculator — Automated property tax calculations
• Deposit Interest Calculator — Pension savings return simulations