A complete summary of year-end medical expense deduction eligibility, limits, and application methods.

A complete summary of year-end medical expense deduction eligibility, limits, and application methods.

As the year-end tax settlement season approaches, wage earners carefully examine various deduction items in anticipation of their 13th month's salary. Among them, Year-end tax settlement medical expense deductionThis tax deduction method directly deducts actual expenses from taxes, resulting in a significant perceived refund effect. However, many people mistakenly believe that all hospital expenses are deductible, leading to disappointment later on. This article will provide detailed information on the new standards, including those that will change starting in 2025, deduction eligibility and limits, and how to apply without missing any details. We hope this information will help you receive your fair share of tax refunds.

Basic principles and application standards for medical expense tax deductions

Medical expense tax credit is the amount of medical expenses paid by an employee for himself or herself and his or her dependents during the year. 3 percent of total salaryThis system directly deducts a certain percentage of the excess from taxes when the amount exceeds the limit. For example, if an employee earns an annual salary of 50 million won, the deduction benefit begins only when medical expenses exceed 1.5 million won. Tax deduction, not income deductionThis is the most crucial point of this system, and it plays a decisive role in determining the amount of refund as it reduces the tax itself produced.

In particular, the medical expense deduction has a very unique advantage compared to other deductions. While general personal deductions strictly follow the age and income requirements of dependents, medical expenses are exempt. No age or income restrictions Deductions are possible. This means that if an employee actually pays medical expenses for their parents or adult children who live separately, they can combine the expenses and claim a deduction. This flexibility makes it a strategic option for many workers.

However, in practice, it's harder than you might think to surpass the 3% threshold of total salary. For healthy young workers, annual hospital expenses often fall below 3% of their salary, making deductions completely unavailable. Therefore, it's crucial to first determine your total salary and calculate the starting point for your deductions. This will greatly assist in developing an efficient spending plan.

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Key Changes to the Medical Expense Deduction in 2025

The year-end medical expense deduction, effective this year, includes an important change that must be noted. Previously, only workers with a total annual salary of 70 million won or less were eligible for the benefit. Postpartum care center cost deductionThe program has now been expanded to all workers, with no income restrictions. Now, regardless of salary level, families can receive a deduction of up to 2 million won per childbirth, significantly reducing the burden on families with children.

Also, as part of the low birth rate measures Dependents under 6 years oldThe previous 7 million won limit on medical expenses has been completely eliminated. Now, medical expenses for children under six years old and grandchildren are fully deductible, providing a significant benefit. This change is expected to provide substantial tax rebates to families raising young children and facing frequent medical expenses. It's important to be fully aware of the tax law changes and prepare the necessary documentation.

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List of deductible and excluded expenses

The deductible basically includes hospital fees for examination and treatment, medicine purchase fees, and glasses and contact lenses purchase fees. Glasses purchase costFor vision correction purposes, up to 500,000 won per person per year is available, and the cost of purchasing assistive devices for the disabled, such as wheelchairs and hearing aids, is also fully deductible. Recently, the cost of vision correction surgeries such as LASIK and LASEK have also been included in the medical expense deduction, allowing many people to benefit.

On the other hand, it is also very important to accurately identify the items excluded from the deduction. Health functional food purchase costCosmetic surgery costs and the cost of purchasing health supplements are not considered medical expenses and therefore are not deductible. Furthermore, caregivers are not eligible for medical expense deductions under current law, so caution is advised.

The area where most mistakes occur is in the insurance coverage area. actual loss medical insuranceAny amounts received from insurance companies through insurance must be excluded from your total expenditures and reported. The National Tax Service separately monitors insurance payment receipts, so if you omit these details and claim a deduction, you run the risk of being judged as an excessive deduction and being subject to additional taxes. Therefore, it's crucial to carefully compare your expenses with the insurance payments you received.

In-depth analysis of deduction rates and limits

Medical expense deduction rates vary depending on the purpose and target of the expense, so understanding them can help you secure a higher refund. The basic deduction rate is 15 percent. However, as part of measures to address the low birth rate, Infertility treatment costsIn this case, a very high deduction rate of 30 percent applies. Couples seeking infertility treatment can receive significant benefits without limits on the cost of treatment, so be sure to keep all relevant receipts.

Medical expenses for premature infants or infants with congenital abnormalities are also subject to a 20 percent deduction. There are also significant differences in the limits. While medical expenses for general dependents are deductible up to a limit of 7 million won per year, myself or an elderly person And the cost for the disabled Full amount without limit This is a deduction. This reflects social consideration to alleviate the burden of medical expenses for vulnerable populations.

As a result, the actual refund amount can vary significantly depending on who paid the medical expenses. In particular, the surgical or treatment costs for parents over 65 years of age are deductible at 15 percent without any limit. Therefore, if you are considering which sibling will pay for your parents' medical expenses, it is wise to consider their annual income level and the deduction threshold when making the decision. Year-end tax settlement strategyThis could be it.

Practical Tax-Saving Strategies to Increase Your Refund

The medical expense tax credit is strategically designed to maximize the use of the fact that there are no income or age restrictions on dependents. Concentrating medical expensesIf you're unsure which spouse will contribute the medical expenses, it's generally more advantageous to pool them with the spouse with the lower income. This is because the deduction threshold of 3 percent of total salary is lowered, significantly increasing the actual deductible amount.

If the end of the year is approaching and your current medical expenses are just under 3 percent of your total salary, you may want to consider getting some dental treatment you've been putting off or getting new glasses to correct your vision. Tips for RefundsThis is because, if you surpass the deductible threshold by even a single point, you'll receive benefits for all hospital expenses you've paid. However, if you've received a refund from actual loss insurance, remember to only calculate your net out-of-pocket expenses, excluding those amounts.

How to prepare supporting documents and apply to the National Tax Service

In the past, you had to visit each hospital and collect receipts, but now you can get them from the National Tax Service. Simplified Year-End Tax Settlement ServiceYou can view most of your records at a glance through Hometax. Starting in mid-January each year, when you log in to Hometax, medical expense details for yourself and your consenting dependents are automatically retrieved. Employees can conveniently review these details and submit them to their company with a single click.

However, not all data is collected automatically. Postpartum care center usage feeSome companies don't require documentation for expenses related to eyeglasses, contact lenses, and some assistive devices, so they're often overlooked in the simplified service. In these cases, employees must obtain receipts and manually submit them to the company. Missing medical expensesThe meticulousness in finding it can change the unit of the refund amount.

Don't despair if you haven't completed your documents by the submission deadline. You still have the opportunity to claim any missed deductions during the May comprehensive income tax filing period or through a correction claim within the next five years. However, as the process can be cumbersome, we recommend preparing and submitting all documents during the regular year-end tax settlement period.

The medical expense deduction isn't simply a expense; it's a tax benefit that guarantees workers' right to health. By accurately calculating the 3% threshold and excluding actual loss insurance benefits, you can receive the maximum refund without unnecessary surtax.

Frequently Asked Questions about Year-End Medical Expense Deductions

Can I deduct hospital expenses reimbursed through actual loss insurance?

No. Only medical expenses you actually incur are eligible for deduction. Therefore, you must deduct any insurance benefits received from your insurance company from your total medical expenses and report them. Failure to do so may result in additional taxes being assessed through a post-inspection audit by the National Tax Service, so be careful.

We are a dual-income couple. Who is better off receiving the children's medical expenses?

Since deductions generally begin to apply when your gross income exceeds 3 percent, it's advantageous for the spouse with the lower income to claim the deduction. However, if one spouse's final tax liability is already zero, there will be no tax refund even if the deduction is claimed. Therefore, it's important to compare estimated tax amounts in advance.

Are sunglasses that are not corrective glasses also deductible?

Sunglasses are classified as fashion items, not medical devices, and are therefore excluded from the deduction. Only the purchase of eyeglasses and contact lenses for vision correction purposes is eligible for a deduction, up to a limit of 500,000 won per person. In this case, you must obtain a receipt from the optician stating your name and that the lenses are for vision correction.

I paid the hospital bills for my parents who live separately. Can I deduct them?

Yes, you can. If your parents are actually supporting themselves on their own income, medical expenses paid for them are deductible even if you live separately. Unlike other categories, medical expenses are not subject to income or age restrictions, which is a major advantage.

Are the costs of treatment received at a hospital abroad also deductible?

Unfortunately, expenses paid at foreign medical institutions are not eligible for medical expense deductions under Korean tax law. Only expenses paid at medical institutions in accordance with domestic medical laws and other relevant laws are eligible. However, even if you purchased medication overseas, if you have a prescription from a domestic hospital and purchased it at a domestic pharmacy, you can still consider deducting it. However, general overseas hospitalization expenses are not eligible.

Conclusion and Key Summary

• Medical expense tax deduction Expenditures exceeding 3% of total salaryIt is a system that provides a refund of 15 to 30 percent.
• From 2025 Postpartum care center deductionis expanded to all workers, and the limit on medical expenses for children under 6 years old has been abolished.
• Amount of actual loss insurance payment receivedIt must be deducted and any missing receipts must be collected and applied for in person.

To sum up Year-end tax settlement medical expense deductionThis is a valuable opportunity to receive government reimbursement for expenses incurred for the health of yourself and your family. In particular, the expanded postnatal care benefits and the full deduction for young children, which began this year, will be a great help to many families. Anyone can benefit from this benefit as long as they clearly remember two things: checking the actual loss insurance premium and calculating the 3 percent threshold. Successful year-end tax settlementYou can complete it. Tax regulations may seem complicated, but we hope you prepare step by step so you don't miss out on the tax refund benefits you're entitled to.