When interest and dividends combined pass 20 million won a year, the excess is folded into the taxpayer's other income and taxed at Korea's progressive 6–45% schedule. Yet because of a comparative taxation rule that computes the bill two ways and takes the larger, someone with no other income pays an effective 14% — the same as the withholding rate — all the way up to roughly 81 million won of financial income.
What moves first is not tax but health insurance. The moment financial income clears 10 million won, the entire amount counts toward the dependent-status income test, and once total counted income exceeds 20 million won the person is reclassified as a regional subscriber paying their own premium. There is a band where the tax bill does not change at all and the insurance bill appears out of nowhere.
What actually changes above 20 million won
Up to 20 million won, a 14% withholding (15.4% including local income tax) settles the liability at payment. As KB Financial explains, only the amount above that line is combined with other income and run through the progressive schedule — and from that point the taxpayer must file a May comprehensive income tax return, even with no other income at all.
The key is that the excess is taxed at the taxpayer's marginal rate. The National Tax Service schedule runs across eight brackets, from 6% on a tax base up to 14 million won to 45% above 1 billion won, with progressive deductions of 0, 1.26m, 5.76m, 15.44m, 19.94m, 25.94m, 35.94m and 65.94m won respectively.
So the extra tax is roughly excess × (marginal rate − 14%). Here is that calculation for someone with 30 million won of financial income — a 10 million won excess — at different levels of other income.
| Other income (tax base) | Marginal rate | Gap vs 14% | Extra tax on the 10m won excess (incl. local tax) |
|---|---|---|---|
| None | 6% | — | 0 won |
| Up to 14m won | 6% | — | 0 won |
| 14m–50m won | 15% | 1%p | 110,000 won |
| 50m–88m won | 24% | 10%p | 1.1m won |
| 88m–150m won | 35% | 21%p | 2.31m won |
| 150m–300m won | 38% | 24%p | 2.64m won |
| 300m–500m won | 40% | 26%p | 2.86m won |
| 500m–1bn won | 42% | 28%p | 3.08m won |
| Over 1bn won | 45% | 31%p | 3.41m won |
These figures assume the 10 million won excess sits entirely inside one bracket; straddling a boundary means splitting it across two rates. A salaried worker with a 60 million won tax base who collects 30 million won in dividends pays about 1.1 million won more. A retiree with no other income collecting the same dividends pays nothing more.
Why financial income alone stops at 14%
Comparative taxation runs both formulas and locks in the larger result. Method ① applies 14% to the first 20 million won and pushes only the excess into the progressive schedule alongside other income. Method ② applies 14% to the entire financial income and runs the progressive schedule on other income only. As Samil PwC notes, this device is precisely why moving into comprehensive taxation can never produce a smaller bill than separate taxation.
With no other income, method ① fills the low brackets first, so method ② wins for a long stretch. Assuming no income besides the financial income and only the 1.5 million won basic personal deduction:
| Financial income (10k won) | Method ① (10k won) | Method ② (10k won) | Final tax (10k won) | Effective rate |
|---|---|---|---|---|
| 3,000 | 331 | 420 | 420 | 14.0% |
| 5,000 | 582 | 700 | 700 | 14.0% |
| 7,000 | 882 | 980 | 980 | 14.0% |
| 8,000 | 1,108 | 1,120 | 1,120 | 14.0% |
| 9,000 | 1,348 | 1,260 | 1,348 | 15.0% |
| 12,000 | 2,184 | 1,680 | 2,184 | 18.2% |
| 20,000 | 5,069 | 2,800 | 5,069 | 25.3% |
Check the 50 million won row. Method ① is 20m × 14% = 2.8m won, plus 28.5m won (30m minus the 1.5m deduction) at 15% less the 1.26m progressive deduction, or 3.015m won — 5.815m won in total. Method ② is 50m × 14% = 7m won. The larger figure wins, and since it equals what was already withheld, nothing further is due in May.
The crossover falls between 80 and 82 million won. At 80 million, method ① yields 11.08m won against method ②'s 11.2m; at 82 million, method ① reaches 11.56m and overtakes method ②'s 11.48m. Local income tax of 10% sits on top of the final figure, which is how the top-bracket burden reaches 49.5%.
Twenty million won is the tax threshold — but the threshold that opens first is health insurance's ten million.
Health insurance moves before the tax does
Dependent status requires total counted income of 20 million won or less a year. Financial income is counted differently, though. As Herald Business reported, interest and dividends of 10 million won or less are excluded entirely — but one won over that line and the whole amount is added to other income. A property tax base above 540 million won lowers the income requirement to 10 million won, and above 900 million won dependent status is hard to keep regardless of income.
The arithmetic is stark. A retiree drawing a 12 million won public pension who also earns 9 million won in interest keeps dependent status: the financial income is excluded, so counted income is 12 million won. Earn 11 million won in interest instead and the full 11 million is added, producing 23 million won and breaking the requirement. Two million won of extra interest buys a brand-new insurance premium.
The cost is not trivial. The Ministry of Health and Welfare set the 2026 health insurance contribution rate at 7.19%, up 0.1 percentage point from 7.09% in 2025. Average monthly premiums rise from 88,962 to 90,242 won for regional subscribers and from 158,464 to 160,699 won for the employee share. Those are averages; regional subscribers, whose property and vehicles are also scored, vary far more widely.
What matters is that nothing happens on the tax side in this band. Interest of 11 million won is nowhere near the 20 million won threshold and is settled by 14% withholding — yet health insurance status flips. Read alongside the 15-million-won private pension threshold, it shows which line matters first when designing retirement cash flow.
What to watch
- Two lines on projected annual financial income — 10 million won (health insurance aggregation begins) and 20 million won (comprehensive taxation begins). Tally once before December
- When interest is attributed — a term deposit books its entire interest in the year it matures. Staggering maturities across calendar years spreads the load
- Dividend payment dates — year-end dividends paid the following year belong to that year. Payment date governs, not record date
- Tax-exempt and separately-taxed account limits — an ISA's loss offsetting and exemption ceiling is one of the few tools that shrinks the financial income total itself
- May filing obligation — above 20 million won you file even with no other income. The 2026 deadline runs to June 1
- Dependent status recalculation — notice arrives when the prior year's income data is reflected. Check the property tax base at the same time
Sources
- Comprehensive income tax rates — National Tax Service
- Financial income comprehensive taxation: who pays how much — KB Financial
- Taxation by product type and tax-saving strategy for those subject to financial income comprehensive taxation — Samil PwC
- 2026 health insurance contribution rate set at 7.19% — Ministry of Health and Welfare
- Dropped from dependent status over 10 million won in interest — Herald Business