6 Tax-Saving Strategies for Dual-Income Couples

6 Tax-Saving Strategies for Dual-Income Couples

For dual-income couples, year-end tax settlements can be a game of strategy. It's not always about putting every deduction on the higher earner; it’s about finding the perfect balance based on your tax brackets and specific expense categories. Here is how to use Hometax data to build the optimal tax plan for your household.

1. Who should claim personal deductions?

Generally, personal deductions (like for dependents) provide more savings for the person in a higher tax bracket. However, if your spouse's income is low enough that their net tax liability is already close to zero, claiming these deductions won't help them further. In those cases, it’s much smarter to shift those deductions to the other partner to optimize the household's total tax burden.

2. The '25% Threshold' for Credit Cards

You can only start claiming credit card deductions once your annual spending exceeds 25% of your total income. Since this is calculated based on individual earnings, it is much easier for the lower-earning spouse to cross that threshold. A pro-tip: use the lower-earning partner's card for your daily living expenses to maximize your total eligible deduction amount.

3. Medical expenses: Go with the lower earner

Medical expense deductions kick in once you spend more than 3% of your total income. Because this 3% bar is lower for the person with the smaller paycheck, it is almost always more efficient to aggregate all medical expenses under the spouse with the lower income. Since medical deductions don't have strict income-based disqualifiers, it doesn't matter whose card was used to pay—just make sure the lower earner files the claim.

4. Sync your payments to avoid disqualification

For insurance premiums and education expenses, the person who actually pays the bill is the one who claims the deduction. If you’ve registered your child as your spouse's dependent but pay for their tuition using your own card, you might find yourself ineligible for the deduction. To be safe, ensure that the person claiming the dependent is also the one handling the payments for their insurance and education.

5. Max out your Pension Savings & IRP

Both partners can contribute to their own Pension Savings or IRP accounts and get tax credits. Since the credit rate is higher for those earning under 55 million KRW, try to prioritize filling the 9 million KRW limit for the spouse with the lower income first. It’s a great way to build your retirement fund while enjoying a solid tax break.

6. Utilize the 'Year-End Preview' service

Each November, the National Tax Service (NTS) releases a 'Year-End Tax Settlement Preview' service. It’s a powerful tool that allows you to simulate your returns based on data from January through September. You can test different scenarios—like splitting dependents versus centralizing them—to see what gives you the best outcome. It’s the perfect time to adjust your spending habits for the final months of the year.