It is a misunderstanding to assume that you will receive more immediately just by looking at the news that the Earned Income Tax Credit and monthly rent deductions are being expanded. Since the details announced on August 19, 2026, are still the government's tax reform plan, you need to examine the actual changes in criteria and the timing of their application separately.
The core of this reform plan lies in raising both the income threshold and the maximum payment amount for the Earned Income Tax Credit, while expanding the monthly rent tax credit limit to 12 million won per year. The plan also includes measures to broaden the monthly rent deduction rate and IRP tax credit rate for young people, but these apply only if all requirements regarding non-homeownership, income, and age are met.
Check the numbers first: Expansion of Earned Income Tax Credit eligibility
The Earned Income Tax Credit (EITC) is moving toward relaxing income criteria based on household type. The annual income threshold for single-person households will rise from 22 million won to 26 million won, and for single-earner households from 32 million won to 37 million won.
The threshold for dual-income households will also be expanded from 44 million won to 52 million won. The maximum payment amounts will increase to 1.8 million won for single-person households, 3.1 million won for single-income households, and 3.6 million won for dual-income households, respectively.
Expanding the income criteria is a separate matter from the actual benefit amount being determined. You must also meet other requirements, such as household type and assets, to receive the Earned Income Tax Credit.
If you have paid monthly rent, check the limit and the youth rate separately.
The annual monthly rent limit eligible for the monthly rent tax credit is from the existing 10 million won to Increased by 2 million won to 12 million wonIt is scheduled to be so. However, the limit of 12 million won does not mean that the government will return the rent in cash, but rather it is the upper limit of the rent amount reflected in the tax credit calculation.
The basic requirements are set as heads of households or household members of non-homeowning households with total income of 80 million won or less or total income of 70 million won or less. Lease agreements and actual monthly rent payment records are central to determining the deduction.
The plan is to apply a deduction rate of 171 TP3T to youth aged 15 to 34 regardless of income level. Since the previous rate was 171 TP3T for the income bracket of 55 million won or less and 151 TP3T for the bracket exceeding that, this effectively means the deduction rate for the high-income bracket of youth is increasing.
If you are a young person, check out these three support programs together.
Tax support for young people is expanding beyond just monthly rent. It has been proposed that the IRP tax credit rate for young people aged 15 to 34 be changed from the existing 121 TP3T to 151 TP3T regardless of income level.
The income tax reduction for young people employed by small and medium-sized enterprises expands the applicable age range from 15–29 to 15–34, increases the general reduction period from 3 years to 5 years, and raises the reduction rate from 701 TP3T to 901 TP3T.
Separate provisions were also presented to differentially extend the exemption period to 6 to 10 years for young people employed by local SMEs, depending on regional conditions. Therefore, the exemption for general SME youth and the support for local SMEs should not be calculated using the same criteria.
For family deductions, consider the types of income as well.
The income criteria for basic deductions for spouses and dependents will also be relaxed. The comprehensive income threshold is set to increase from 1 million won or less per year to 3 million won or less, and for those with only earned income, the total salary threshold is set to increase from 5 million won or less to 7.5 million won or less.
This change does not mean that all family members who have worked part-time or short-term jobs are eligible for the basic deduction. Since the criteria for determination vary depending on the type of income, such as business income or other income, you should not assume eligibility based solely on the total amount.
Non-homeowning married couples living separately can each claim an income tax deduction for the repayment of principal and interest on housing rental loans, with a combined annual limit of 4 million won. It is also important to distinguish that the application methods for monthly rent tax credits and income tax deductions related to Jeonse funds differ.
| Furniture type | Existing income standards | Reform plan income criteria | Maximum payment amount under the reform plan |
|---|---|---|---|
| detached house | 22 million won | 26 million won | 1.8 million won |
| Single-income households | 32 million won | 37 million won | 3.1 million won |
| dual-income households | 44 million won | 52 million won | 3.6 million won |
Living support and vehicle benefits have different directions.
The tax-exempt scope of childbirth support payments is being expanded from payments made within two years of childbirth to payments made after pregnancy. Additionally, a direction was presented to transition marriage and childbirth support to direct financial assistance, rather than just tax reduction methods.
The requirement for a total salary of 70 million won or less for the 30% additional deduction for cultural expenses will be abolished, and deduction limits will be applied differently depending on income brackets. For public transportation, the plan includes eliminating the existing 40% additional deduction rate and unifying it under the basic deduction, while converting it into a refund program.
Tax benefits for eco-friendly vehicles are scheduled to be reduced rather than expanded. The maximum individual consumption tax reduction of 700,000 won for hybrid vehicles is set to end at the end of 2026, and reductions for electric and hydrogen vehicles will also be gradually reduced starting in 2027 and are scheduled to end in 2029.
Now is the time to distinguish between the reform plan and the finalized system.
This content concerns the tax reform plan announced by the government on August 19, 2026. As detailed standards or implementation dates may change during the National Assembly deliberation and legislative process, you must not report it in the same manner as the currently applied system.
It has been proposed that the preferential deduction rate for Hometown Love Donations be applied starting with donations made in 2027. You should not assume that the new deduction rate will be applied retroactively to donations made in 2026, and the Earned Income Tax Credit and monthly rent deductions must also be determined based on the effective year of the final legislation.
The key is not just looking at income criteria, but checking household type, age, non-homeownership status, income type, and implementation timing all at once.
To summarize, the Earned Income Tax Credit (EITC) is expanding both its income threshold and maximum payment amount, while the monthly rent deduction centers on an annual limit of 12 million won and the Youth 17% deduction. You can reduce the number of deductions you miss by marking the items that apply to you in advance and comparing them again based on the finalized laws when actually filing.