Korean Pension Savings & IRP Tax Credit Calculator

This calculator shows how much tax you get back at year-end settlement or on your income tax return for the money you paid into pension savings and IRP accounts during the year. The relief is a tax credit, not an income deduction: it comes straight off the tax computed, not off the tax base, so whatever your tax rate, a fixed share of what you paid in comes back. Enter the pension savings contribution, the IRP or other retirement pension contribution, your total salary and, if you know it, your computed tax, and it shows the eligible amount, the actual credit and the room left up to the limit.

The credit exists because the national pension alone does not fund retirement, so the state rewards people for building their own. It comes with a condition. The tax returned when you pay in is taxed again, at a lower rate, when you draw it as a pension. It is a deferral rather than a waiver, and breaking the account early can cost more than was returned.

Mostly employees deciding, as the year ends, how much more to pay in to reach the limit. Because the limit has two layers, the same money can count or be wasted depending on which account it goes into, so the sensible order is to work out the split here before paying in.

Anyone whose total salary is near ₩55,000,000 should also look. That line splits the credit rate into 15% and 12%, so the same ₩9,000,000 returns different amounts. People with little computed tax should enter it too: a credit cannot exceed the tax due, so filling the limit may not return the full amount.

The basis is 소득세법 제59조의3제1항. The rate is 15% where total salary is ₩55,000,000 or less and 12% above that. The limit is ₩6,000,000 a year for pension savings accounts, rising to ₩9,000,000 a year when IRP or other retirement pension contributions are added. The pension savings cap applies only to pension savings accounts, so ₩9,000,000 paid into an IRP alone is fully eligible.

There are three steps. First, pension savings contributions count only up to ₩6,000,000. Second, retirement pension contributions are added, with the total capped at ₩9,000,000. Third, the eligible amount is multiplied by the rate to give the credit. If you entered your computed tax, the credit is capped at that figure once more, because a tax credit needs tax to offset and any excess is not refunded.

Take the calculator's defaults: an employee with a total salary of ₩50,000,000 who paid ₩6,000,000 into pension savings and ₩3,000,000 into an IRP. The ₩6,000,000 is within its cap and counts in full, and adding the ₩3,000,000 gives ₩9,000,000, exactly the combined limit, so the eligible amount is ₩9,000,000. Salary is under ₩55,000,000, so the 15% rate applies and ₩1,350,000 comes back.

Put the same ₩9,000,000 into a single pension savings account and the result changes. Only ₩6,000,000 counts, ₩3,000,000 earns nothing, and the credit falls to ₩900,000. Move that ₩3,000,000 to an IRP and it returns to ₩1,350,000. With a salary of ₩70,000,000, the 12% rate applies to the same ₩9,000,000 and the credit is ₩1,080,000.

The first is putting the whole ₩9,000,000 into one pension savings account. Anything above ₩6,000,000 is wasted, so the excess must go into an IRP or other retirement pension account; the ₩3,000,000 of extra room exists only there. The second is ignoring computed tax. A credit is subtracted from tax due, so with little tax the credit stops at the tax even if the limit is filled. In a year of low income or many other reliefs there is little point in reaching the limit.

The third is contributing money you may need soon. Withdrawing early instead of drawing a pension triggers other-income tax on the contributions that earned the credit and on the gains, which can exceed what was returned. The fourth is not distinguishing salary-only earners from others: the ₩55,000,000 threshold applies when you have only earned income, and with other income the test is comprehensive income instead. Foreign workers who elect the flat-rate tax also lose access to this credit, which is easy to overlook.