One Comes Off Early, the Other Late
The two names sit side by side on year-end settlement paperwork, but they do different work. Following the order in which tax is calculated shows the difference.
An income deduction comes off before step 3. Lowering taxable income reduces the tax by the rate that would have been applied to it. So the actual saving is the deduction multiplied by the rate, not the deduction itself.
A tax credit comes off after step 3. The rate calculation is already done, so the credit comes off the tax as it stands. Whatever the income, the tax falls by the amount calculated.
An income deduction of KRW 1 million is worth KRW 60,000 to someone on a 6% rate and KRW 240,000 to someone on 24%. A tax credit of KRW 1 million is KRW 1 million to anyone. An income deduction does more the higher the income; a tax credit removes the same amount regardless.
On the Same KRW 3 Million
주택청약종합저축 is an income deduction and 연금저축 is a tax credit. We compared the results of paying in the same amount.
KRW 495,000
The tax removed by KRW 3 million into 연금저축 at a credit rate of 16.5%. The same amount into 주택청약종합저축 removes KRW 198,000.
주택청약종합저축 requires a householder of a household owning no home with total salary of KRW 70 million or less. The two schemes carry different requirements, so switching cannot be decided on the amounts alone.
Two things produce the gap. Only 40% of the subscription savings contribution is eligible, and the rate is then applied to that KRW 1.2 million. Pension savings applies the credit rate to the whole KRW 3 million.
Subscription savings shrinks KRW 3 million to KRW 1.2 million before the rate goes on; pension savings puts the credit rate straight onto KRW 3 million.
The Gap Widens at Lower Incomes
An income deduction multiplies by the rate, so a low rate produces a small saving. A tax credit works the other way, applying a higher credit rate to lower incomes.
The 연금저축 credit rate is 16.5% at global income of KRW 45 million or less (total salary of KRW 55 million or less where the only income is employment) and 13.2% above that. The measure differs from the taxable income bands, so the boundaries do not line up exactly.
In the band at or below KRW 14 million the gap opens to KRW 415,800. The income deduction side runs at 6.6%, leaving only KRW 79,200 out of a KRW 1.2 million deduction.
As the rate rises the income deduction rises with it and the gap narrows. Above taxable income of KRW 50 million the difference closes to KRW 79,200.
Where Your Rate Sits
Calculating the saving from an income deduction means knowing your taxable income band. That is not total salary but total salary less the earned income deduction and the various income deductions.
The rightmost column is the tax that KRW 1 million of income deduction actually removes. A tax credit of KRW 1 million removes KRW 1 million whatever the band.
Where taxable income sits near a band boundary, the deduction pushes part of it into the band below. Two rates then apply in combination, and the saving lands between the two band figures.
Calculated as the difference in calculated tax before and after the deduction. Taxable income of KRW 51 million becomes KRW 49.8 million after the deduction, so the rate splits at the KRW 50 million line.
At taxable income of KRW 51 million the saving is KRW 297,000, less than the KRW 316,800 at KRW 60 million despite both sitting in the 24% band. The portion pushed down by the deduction takes the 15% of the band below.
Deduction items carry different requirements, so choosing on the saving alone is difficult. 주택청약종합저축 requires being a householder of a household owning no home; 연금저축 assumes receiving the money as a pension from age 55. Conditions and the character of the money come first, and the amounts afterward.
Frequently Asked Questions
Does an income deduction of KRW 1 million return KRW 1 million?
No. Taxable income falls by KRW 1 million, so the tax falls by that amount multiplied by your rate. At 16.5% that is KRW 165,000.
Does a tax credit remove exactly the amount calculated?
Yes. It comes straight off calculated tax, so the tax falls by the calculated amount regardless of income band. Where calculated tax is less than the credit, though, it only falls to that extent.
Which is better?
On the same amount, the tax credit does more. The two schemes carry different limits and requirements, though, and the money serves different purposes. Subscription savings exists for a housing subscription; pension savings is money received as a pension from age 55.
Where do I find my taxable income?
The taxable income line on your year-end settlement result. It is total salary less the earned income deduction and the various income deductions, including personal allowances.
Can I take both?
Meeting each set of requirements takes both. The KRW 3 million a year for subscription savings and the KRW 6 million a year for pension savings are separate limits and do not overlap.
Which applies first in the year-end settlement?
The income deduction. Income deductions set taxable income, the rate produces calculated tax, and tax credits come off that. The order is fixed and cannot be changed.
What if calculated tax is zero?
There is no tax to subtract, so neither deduction produces anything. This applies where income is low enough that no tax arises in the first place.
Sources and basis
- 주택청약종합저축 income deduction — Restriction of Special Taxation Act article 87, 40 hundredths of the KRW 3 million annual contribution limit
- Pension account tax credit — Income Tax Act article 59-3, credit rate of 15% or 12%
- Global income tax rates — 국세청 (National Tax Service) rate schedule
- Local income tax — 10% of income tax under the Local Tax Act
- Calculation basis — contributions of KRW 3 million a year, with no other deduction items reflected
Tax law is subject to amendment. The law was verified on August 8, 2026.