Korean Business Vehicle Expense Calculator

This calculator works out how much of what a business spends on a passenger car counts as a deductible expense for Korean income tax. Enter the year's total car costs, including depreciation, fuel, insurance, repairs and vehicle tax, the depreciation portion of that, whether the car carries business-only insurance, whether a driving log was kept and which number car it is, and you get the amount allowed, the amount disallowed and any depreciation carried into the next year.

Car costs are the expense where business and private life mix most easily, so the law limits them in three layers. Only the business-use share is allowed; without a driving log that share is cut by a statutory formula; and depreciation has an annual cap independent of the share. The calculator passes the cost through the three layers in order and shows what survives.

Sole proprietors who are obliged to keep double-entry books. Businesses on the simplified ledger are not subject to these limits. Running it before buying or leasing a car in the business's name shows how much of the cost will really be deductible, which helps decide the price and class of car. The more expensive the car, the more the depreciation cap bites and the lower the share allowed.

Run it again before year-end. The "gain from keeping a log" figure shows how much more would be allowed with a driving log, so you can decide whether to start recording for the months that remain. And run it before taking on a second car, because the insurance condition changes completely from the second car onward.

소득세법 제33조의2 allows only the business-use amount of passenger car costs as a necessary expense. The business-use ratio is set by 소득세법 시행령 제78조의3. With a driving log it is the share of business mileage in the log. Without one, the full cost is allowed only if the year's costs are ₩15 million or less; above that, only the ratio of ₩15 million to the total cost is allowed.

The same decree makes business-only car insurance a condition. The first car is allowed without it, but from the second car onward the allowed ratio without insurance is 0%, meaning the entire cost is disallowed. Depreciation is forced onto the straight-line method over 5 years, and of the depreciation multiplied by the business ratio only ₩8 million a year is deductible in that year. The excess is not lost: it carries forward and comes in whenever a later year falls short of the cap.

The order of operations is this. First the insurance test: a second car without insurance stops here with ₩0 allowed. Next the business ratio is fixed and multiplied into the total cost. Then the same ratio is applied to depreciation and compared with ₩8 million; any excess is taken out of the business-use amount and carried forward. What remains is the year's deductible expense.

The default on screen is ₩30 million of annual cost, of which ₩10 million is depreciation, on a second car with insurance but no driving log. ₩30 million exceeds ₩15 million, so the ratio becomes ₩15 million divided by ₩30 million, or 50%. The business-use amount is ₩15 million, the business share of depreciation is ₩5 million and within the cap, so nothing carries forward; ₩15 million is allowed and ₩15 million disallowed.

Keep a log proving 100% business use under the same conditions and the business-use amount becomes ₩30 million; of the ₩10 million depreciation only ₩8 million is allowed this year and ₩2 million carries forward, so ₩28 million is deductible, ₩13 million more from the log alone. Without insurance, on the other hand, the second car gets ₩0. And even with a log, if depreciation were ₩15 million then ₩7 million would carry forward and the year's deduction would stop at ₩23 million.

The most expensive mistake is skipping business-only insurance on a second car. A few tens of thousands of won in premium wipes out every won of that car's costs. Next is the driving log. Under ₩15 million of cost none is needed, but above it the ratio is cut for every won not covered by a log. The log records origin, destination, distance and purpose for each trip, and one assembled in a rush at year-end is unlikely to be accepted.

Treating the depreciation cap as money lost is another error. Anything over ₩8 million carries forward and comes in later, so a car kept for years ends up mostly deducted, though selling early changes how the remaining carry-forward is handled. Leased and rented cars face the same limits, and the depreciation-equivalent part of the lease payment goes in the depreciation field. This calculator is for sole proprietors paying income tax; corporations have a parallel set of rules in 법인세법.