A push is under way to raise the age limit for South Korea's basic child tax deduction to 26 from the current 20, a change aimed at easing the burden on parents as children become financially independent later in life because of longer university study and prolonged job searches.
Moon Jin-seok, a Democratic Party of Korea lawmaker on the National Assembly's Finance and Economic Committee, said on the 21st that he will soon introduce a partial amendment to the Income Tax Act raising the age threshold. The deduction amount would remain unchanged at 1.5 million won ($1,000) per child a year.
The bill is intended to relieve parents who must support adult children for extended periods as young people take longer to find jobs. According to Statistics Korea, it takes university graduates an average of about 11 months to land their first job. Factoring in the average five years and one month it takes to complete a four-year degree, as well as military service for men, most young Koreans do not receive their first paycheck until their mid-to-late 20s. The government also cited such structural changes in September when it raised the upper age limit for youth under the Special Act on the Promotion of Youth Employment to 34 from 29.
Advanced economies already operate tax systems focused on whether family members are in fact dependents. Japan grants an income deduction of 630,000 yen a year for specified dependent relatives aged 19 to under 23, higher than the standard 380,000 yen deduction, easing the tax burden on households with children in that age range. France, where the general threshold for inclusion in a tax household is under 21, defers that limit to under 25 for children continuing their studies.
Even if the tax law passes, however, not all households would qualify on age alone. The existing income requirement would remain in place, under which a child's annual income must not exceed 1 million won — or 5 million won in total annual wages if the income comes only from employment. With the minimum wage rising, even short weekend part-time work can easily push a child past the 5 million won line. Whether the bill is reviewed together with measures easing the income requirement — such as a proposal Moon introduced in September to raise the total wage threshold for dependents to 7.5 million won — is expected to be the key variable determining its effectiveness.