Income Deduction Amount Calculation Guide
Calculate the exact venture investment income deduction based on investment amounts and income levels, with concrete tax savings calculations by bracket.
Income DeductionIncome Tax Deduction
Tax deduction system for venture enterprise investment: 100% for up to 30M KRW, 70% for 30-50M KRW, 30% for over 50M KRW. Amount Calculation Guide
The effectiveness of the venture investment income deduction becomes real only when you see it in concrete numbers. This guide calculates the income deduction amounts and actual tax savings across various investment amounts and income brackets.
Deduction Bracket Review
First, let's revisit the deduction rate brackets.
| Investment Amount Bracket | Deduction Rate |
|---|---|
| Up to 30M KRW | 100% |
| Over 30M KRW ~ up to 50M KRW | 70% |
| Amount exceeding 50M KRW | 30% |
Deduction cap: 50% of comprehensive income for the year (excess can be carried forward for 3 years)
Korea Comprehensive Income Tax Rates (as of 2024)
To calculate tax savings, you need to know the marginal tax rate.
| Taxable Income Bracket | Tax Rate | Progressive Deduction |
|---|---|---|
| Up to 14M KRW | 6% | — |
| 14M KRW ~ 50M KRW | 15% | 1.26M KRW |
| 50M KRW ~ 88M KRW | 24% | 5.76M KRW |
| 88M KRW ~ 150M KRW | 35% | 15.44M KRW |
| 150M KRW ~ 300M KRW | 38% | 19.94M KRW |
| 300M KRW ~ 500M KRW | 40% | 25.94M KRW |
| 500M KRW ~ 1B KRW | 42% | 35.94M KRW |
| Over 1B KRW | 45% | 65.94M KRW |
An additional 10% local income tax applies, soStock Option
Stock purchase rights granted to venture enterprise employees. Up to 200M KRW/year in exercise gains are tax-exempt, with optional separate taxation. the effective tax rate ranges from 6.6% to 49.5% across brackets.
Income Deduction Calculations by Investment Amount
Case 1: Investment of 10M KRW
| Item | Amount |
|---|---|
| Investment amount | 10M KRW |
| Deduction rate | 100% (bracket up to 30M KRW) |
| Income deduction | 10M KRW |
Tax savings (based on comprehensive income of 50M KRW, marginal tax rate 24%) - Tax savings: 10M KRW × 24% = 2.4M KRW - Including local income tax: 10M KRW × 26.4% = 2.64M KRW
Tax savings (based on comprehensive income of 200M KRW, marginal tax rate 38%) - Tax savings: 10M KRW × 38% = 3.8M KRW - Including local income tax: 10M KRW × 41.8% = 4.18M KRW
Case 2: Investment of 30M KRW
| Item | Calculation | Amount |
|---|---|---|
| Bracket up to 30M KRW | 30M KRW × 100% | 30M KRW |
| Total income deduction | — | 30M KRW |
Tax savings (based on comprehensive income of 80M KRW, marginal tax rate 35%) - Tax savings: 30M KRW × 35% = 10.5M KRW - Including local income tax: 30M KRW × 38.5% = 11.55M KRW
This is equivalent to receiving back approximately 38.5% of the investment principal as a tax refund.
Case 3: Investment of 50M KRW
| Item | Calculation | Amount |
|---|---|---|
| Bracket up to 30M KRW | 30M KRW × 100% | 30M KRW |
| Bracket 30M ~ 50M KRW | 20M KRW × 70% | 14M KRW |
| Total income deduction | — | 44M KRW |
Tax savings (based on comprehensive income of 150M KRW, marginal tax rate 38%) - Tax savings: 44M KRW × 38% = 16.72M KRW - Including local income tax: 44M KRW × 41.8% = 18.39M KRW
Investing 50M KRW results in approximately 18.39M KRW returned in taxes, meaning the effective investment principal is only 31.61M KRW.
Cap check: 50% of comprehensive income of 150M KRW is 75M KRW, so no cap is exceeded.
Case 4: Investment of 100M KRW
| Item | Calculation | Amount |
|---|---|---|
| Bracket up to 30M KRW | 30M KRW × 100% | 30M KRW |
| Bracket 30M ~ 50M KRW | 20M KRW × 70% | 14M KRW |
| Bracket above 50M KRW | 50M KRW × 30% | 15M KRW |
| Total income deduction | — | 59M KRW |
Tax savings (based on comprehensive income of 300M KRW, marginal tax rate 40%) - Tax savings: 59M KRW × 40% = 23.6M KRW - Including local income tax: 59M KRW × 44% = 25.96M KRW
Cap check: 50% of comprehensive income of 300M KRW is 150M KRW, so the full 59M KRW deduction is applicable.
Deduction Cap Table by Comprehensive Income Level
The maximum deductible amount varies by income level.
| Comprehensive Income | Deduction Cap (50%) | Maximum Deduction when Investing Max | Actual Maximum Deduction |
|---|---|---|---|
| 50M KRW | 25M KRW | Max at investment of 25.75M KRW | 25M KRW |
| 100M KRW | 50M KRW | Max at investment of 52.9M KRW | 50M KRW |
| 200M KRW | 100M KRW | Investment of 200M KRW+ | Complex calculation required for max deduction |
| 500M KRW | 250M KRW | Large-scale investment without restriction | — |
Note: Deduction amounts exceeding the cap can be carried forward for 3 years. Using the carryforward deduction allows you to effectively receive deductions on a larger total investment.
Tax Savings Comparison Based on Effective Tax Rate
Comparing the ratio of actual tax refund to investment principal (effective deduction rate) is as follows:
| Investment Amount | Income Deduction | Tax Savings at 35% Marginal Rate | Tax Savings at 42% Marginal Rate | Effective Deduction Rate vs. Principal (42%) |
|---|---|---|---|---|
| 10M KRW | 10M KRW | 3.85M KRW | 4.62M KRW | 46.2% |
| 30M KRW | 30M KRW | 11.55M KRW | 13.86M KRW | 46.2% |
| 50M KRW | 44M KRW | 16.94M KRW | 20.32M KRW | 40.6% |
| 100M KRW | 59M KRW | 22.72M KRW | 27.26M KRW | 27.3% |
| 200M KRW | 74M KRW | 28.49M KRW | 34.18M KRW | 17.1% |
*Effective tax rate including local income tax: tax rate × 1.1 applied
This table shows that investments of 30M KRW or less enjoy the highest tax efficiency with the 100% deduction rate applied. Conversely, for large-scale investments, the deduction rate decreases and relative tax efficiency declines.
Married Couple Joint Investment Strategy
Combining the income of two people allows access to a larger deduction cap.
Case: Each Spouse Invests 50M KRW (100M KRW Combined)
Conditions: - Husband: comprehensive income 200M KRW, marginal tax rate 38% - Wife: comprehensive income 100M KRW, marginal tax rate 35%
| Person | Investment Amount | Income Deduction | Tax Savings (incl. local tax) |
|---|---|---|---|
| Husband | 50M KRW | 44M KRW | 18.39M KRW |
| Wife | 50M KRW | 44M KRW | 16.94M KRW |
| Total | 100M KRW | 88M KRW | 35.33M KRW |
If the husband alone invested 100M KRW, the income deduction would be 59M KRW and tax savings approximately 25.96M KRW. By distributing the investment between spouses, tax savings rise to 35.33M KRW — an additional savings of approximately 9.37M KRW.
However, the spouse must have independent comprehensive income, and the investments must be made separately under each person's name. Distributing names through improper means carries tax risk.
Strategy of Distributing Investments Across Years
If you plan to invest 50M KRW, let's look at the difference between investing all at once versus spreading it out.
Investing 50M KRW All at Once (based on comprehensive income of 60M KRW)
- Income deduction: 44M KRW
- Deduction cap (50%): 30M KRW
- Amount actually applied: 30M KRW (carryforward 14M KRW)
- Carryforward deduction availability depends on income the following year
Investing 25M KRW per Year over 2 Years
- Year 1 income deduction: 25M KRW × 100% = 25M KRW (within 30M KRW cap)
- Year 2 income deduction: 25M KRW × 100% = 25M KRW (within 30M KRW cap)
- 2-year actual total deduction: 50M KRW
By distributing the investment, you can receive the full deduction without any carryforward, and the two separate investments each have their own 3-year holding period clock running, ensuring portfolio liquidity as well.
Frequently Asked Questions: Calculation-Related
Q: Is the income deduction amount the same as the tax refund amount? A: No. The income deduction amount is subtracted from your income, and the actual tax refund is the deduction amount × the marginal tax rate. For example, a deduction of 30M KRW results in an actual refund of approximately 9.9M KRW to 13.95M KRW.
Q: If there is no tax to refund, is the income deduction pointless? A: In this case, even if you receive the income deduction for that year, a refund may not be generated. The excess deduction beyond the cap is carried forward and can be used in future years when income exists.
Q: If I receive the income deduction, will my health insurance premium also decrease the following year? A: If comprehensive income decreases, health insurance premiums may also decrease for regionally insured persons. For employment-insured persons, the health insurance premium withheld by the employer is unaffected, but if there is other comprehensive taxable income, it may affect the related insurance premium calculation.
Q: Is it impossible to apply for the income deduction if an investment confirmation is not issued? A: Yes, that is correct. The investment confirmation issued by KBAN is a mandatory requirement for applying for the income deduction. It is important to apply immediately after investing.
We hope this calculation guide helps you build the optimal investment strategy suited to your income and investment plans. Since specific tax planning varies according to individual income circumstances, if you are planning a large-scale investment, we recommend consulting with a tax accountant in advance.