2026 Year-End Tax Settlement: Is the Basic Credit Card Income Deduction Limit KRW 4,000,000 for Workers with 2 Children?
Yes. Starting with the 2026 tax year, employees with total annual salary of KRW 70,000,000 or less who have at least 2 qualifying children or other eligible descendants will see the annual basic income deduction limit for credit card and other eligible spending increase from KRW 3,000,000 to KRW 4,000,000. However, having 2 children does not automatically entitle someone to a deduction of KRW 4,000,000 or a tax refund of KRW 4,000,000.
Eligibility for the KRW 4,000,000 Limit Depends on More Than the Number of Children
For employees with total annual salary of KRW 70,000,000 or less, the basic deduction limit is KRW 3,000,000 for those without qualifying children or other eligible descendants, KRW 3,500,000 for those with 1 qualifying child, and KRW 4,000,000 for those with 2 or more.
The amounts differ when total annual salary exceeds KRW 70,000,000. In this income bracket, the basic limit is KRW 2,500,000 for employees without qualifying children or other eligible descendants, KRW 2,750,000 for those with 1 qualifying child, and KRW 3,000,000 for those with 2 or more.
Therefore, the statement that having 2 children qualifies someone for a limit of KRW 4,000,000 is accurate only when accompanied by the condition total annual salary of KRW 70,000,000 or less.
| Number of qualifying children or other eligible descendants | Total annual salary of KRW 70,000,000 or less | Total annual salary exceeding KRW 70,000,000 |
|---|---|---|
| None | KRW 3,000,000 | KRW 2,500,000 |
| 1 | KRW 3,500,000 | KRW 2,750,000 |
| 2 or more | KRW 4,000,000 | KRW 3,000,000 |
Looking only at the increases introduced in 2026, employees earning KRW 70,000,000 or less with at least 2 qualifying children or other eligible descendants receive an increase of KRW 1,000,000 over the previous KRW 3,000,000 limit. For employees earning more than KRW 70,000,000, the limit increases by KRW 500,000 compared with the previous KRW 2,500,000 limit.
Not Every Child Counts Toward the Eligibility Requirement
Children, grandchildren, and other eligible direct descendants must meet specific requirements to be included when calculating the deduction limit.
Under the 2026 rules, the combined taxable income of these direct descendants and other eligible family members for the relevant tax year must not exceed KRW 1,000,000. If they have only employment income, the requirement is total annual salary of KRW 5,000,000 or less.
As a general rule, they must be 20 years old or younger. However, the age restriction does not apply to individuals with disabilities. In addition, if another taxpayer claims the basic personal deduction for a child or other eligible descendant, that person cannot also be counted toward the expanded credit card income deduction limit by another taxpayer.
Therefore, rather than automatically applying the KRW 4,000,000 limit simply because a household has two children, employees should check whether each child individually meets these requirements.
KRW 4,000,000 Is the Basic Income Deduction Limit, Not the Amount Spent Using a Card
The figure most likely to cause confusion here is KRW 4,000,000.
It does not mean that spending KRW 4,000,000 using a card will result in a refund of that amount, nor does it mean that KRW 4,000,000 will be deducted directly from the tax owed. Instead, the basic limit on the amount that can be deducted from employment income after calculating eligible credit card and other spending has been increased to KRW 4,000,000.
The income deduction for credit card and other eligible spending begins to apply only when annual eligible spending exceeds 25% of the employee's total annual salary for the relevant tax year.
For example, if total annual salary is KRW 60,000,000, the minimum spending threshold is KRW 15,000,000.
Author's calculation: KRW 60,000,000 × 25% = KRW 15,000,000
Therefore, even if an employee has 2 qualifying children or other eligible descendants and a basic deduction limit of KRW 4,000,000, they cannot claim the full KRW 4,000,000 unless the actual income deduction calculated from eligible spending and the applicable deduction rates reaches that amount.
What Increased from the Previous KRW 3,000,000 Limit Is the Basic Deduction Limit
The portion expanded according to the number of children is the basic limit for the income deduction on credit card and other eligible spending.
For employees with total annual salary of KRW 70,000,000 or less, having at least 2 qualifying children or other eligible descendants increases the basic limit from KRW 3,000,000 to KRW 4,000,000, an increase of KRW 1,000,000. For employees earning more than KRW 70,000,000, the limit rises from KRW 2,500,000 to KRW 3,000,000, an increase of KRW 500,000.
However, this does not mean that the additional deduction limits applicable to spending at traditional markets, on public transportation, or on cultural and sports activities also increase by KRW 1,000,000 according to the number of children.
In other words, it would be incorrect to assume that having 2 children automatically increases every component of the overall credit card income deduction limit by KRW 1,000,000 compared with the previous rules.
It Is Also Important to Distinguish When the New Rules Take Effect
The expanded limits apply to tax periods beginning on or after 2026-01-01.
Therefore, the 2025 tax year should not be confused with the 2026 tax year. When calculating deductions based on credit card, debit card, cash receipt, and other eligible spending incurred during 2026, employees should check the revised basic limits according to the number of qualifying children or other eligible descendants.
The credit card and other eligible spending income deduction system is currently scheduled to remain in effect until 2028-12-31.
Dual-Income Couples Must Also Check Which Parent Claims the Basic Deduction for Each Child
For dual-income married couples, another requirement is just as important as the number of children.
Children and other eligible descendants counted toward the expanded limit must not be claimed for the basic personal deduction by another taxpayer. Therefore, both spouses cannot count the same child separately toward their respective expanded deduction limits.
When preparing for year-end tax settlement, rather than simply calculating based on being a household with two children, it is more accurate to check each employee's total annual salary, each child's income and age, and whether the basic personal deduction has been claimed for that child.
The key point for the 2026 tax year is straightforward. If total annual salary is KRW 70,000,000 or less and the employee has at least 2 qualifying children or other eligible descendants, the basic income deduction limit for credit card and other eligible spending is KRW 4,000,000. If total annual salary exceeds KRW 70,000,000, the basic limit is KRW 3,000,000 even when the same family eligibility requirements are met.
It is also essential to remember that KRW 4,000,000 is the basic income deduction limit, not the tax refund amount, to avoid incorrectly estimating the final year-end tax settlement result.
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