2027 Hometown Love Donation Tax Credit Reform Plan: Regional Preferences ======================================================================== Under the government’s proposed plan, starting in 2027, tax credit rates for Hometown Love Donations exceeding KRW 100,000 may vary depending on conditions in the recipient region. However, regional classifications and credit rates must undergo the legislative process, so donors should check the final laws before donating. - The Hometown Love Donation Program allows individuals to donate to local governments outside their registered place of residence and receive tax credits and thank-you gifts. - The current annual donation limit is KRW 20 million, and donations of at most KRW 100,000 are fully credited when the effects of national and local income taxes are combined. - The proposed 2027 plan applies different credit rates to the portion exceeding KRW 100,000 by classifying regions into the capital region, non-capital-region metropolitan cities and similar areas, other non-capital regions, and preferential areas in other non-capital regions. - Under the announced preferential example, the rate rises to 55.0% for the portion exceeding KRW 100,000 and at most KRW 200,000, and to 27.5% for the portion exceeding KRW 200,000. - A tax credit does not guarantee a cash refund, and the actual tax savings may vary depending on the donor’s final tax liability and the final legislation. The Hometown Love Donation Program allows individuals to donate to a local government outside their current area of residence and receive a tax credit and a thank-you gift. Under the government’s announced reform plan, the tax credit rate for donations exceeding 100,000 won will increase from 2027 for regions facing more difficult conditions. However, this explanation is based on the announced proposal. The implementation date, regional classification criteria, or tax credit rates may change during National Assembly review and legislative revisions, so donors should check the finalized laws and regulations in effect at the time of donation. Basic Structure of the Hometown Love Donation Program Individuals may donate to local governments other than the one listed as their residence in the resident registration system. In general, they may not donate to the metropolitan-level or municipal-level local government to which they belong, and donations in the name of a corporation are not permitted. The main elements of the current program are as follows. Category Details Donor Individual Ineligible donation recipients Metropolitan-level and municipal-level local governments corresponding to the donor’s registered residence Annual donation limit 20 million won in total Tax benefit Tax credit against the donor’s income tax and local income tax Thank-you gift A local government may provide gifts worth at most 30% of the donation amount Main donation channels Hometown Love e-Donation or designated in-person reception desks Thank-you gifts are not paid in cash to every donor. Donors select from items offered by the local government, and the available items vary depending on supply conditions and each region’s operating practices. Current Tax Credit Method Under the current structure, the same tax credit rates apply regardless of which local government receives the donation. The widely publicized rates of 44.0% and 16.5% combine the income tax credit with the related local income tax effect. Donation bracket Current combined tax credit effect 100,000 won or less Full amount More than 100,000 won and at most 200,000 won 44.0% of the amount exceeding 100,000 won More than 200,000 won 16.5% of the amount exceeding 200,000 won For example, if 200,000 won is donated, the calculated tax credit under the current rules is 144,000 won. First 100,000 won: 100,000 won 100,000 won exceeding the first 100,000 won: 100,000 won × 44.0% = 44,000 won Total: 144,000 won For a donation of the annual limit of 20 million won, the current maximum calculated tax credit is 3,411,000 won. This calculation assumes that the donor has sufficient tax liability to use the entire credit. Changes Under the 2027 Proposal The core of the reform proposal is to apply different regional tax credit rates to donations exceeding 100,000 won. The announced structure divides recipient local governments into the following four categories. Seoul metropolitan area Metropolitan cities and similar areas outside the Seoul metropolitan area Other areas outside the Seoul metropolitan area Preferential regions among other areas outside the Seoul metropolitan area The plan is to apply higher tax credit rates to regions facing relatively more difficult conditions. The differentiation mainly applies to the portion exceeding 100,000 won, rather than changing the full credit structure for donations of 100,000 won or less. Representative preferential rates announced are as follows. Donation bracket Current tax credit rate Example of announced preferential rate More than 100,000 won and at most 200,000 won 44.0% 55.0% in other areas outside the Seoul metropolitan area and preferential regions among such areas More than 200,000 won 16.5% 27.5% in preferential regions among other areas outside the Seoul metropolitan area The highest tax credit rate will not automatically apply to every region outside the Seoul metropolitan area. The criteria for designating preferential regions and the classification of each local government must be confirmed in the finalized laws, regulations, and official guidance. How Much Could the Tax Credit Change? Donating 200,000 Won to a Preferential Region Assuming that a 55.0% rate applies to the bracket above 100,000 won and at most 200,000 won, the tax credit would be 155,000 won. First 100,000 won: 100,000 won Remaining 100,000 won: 100,000 won × 55.0% = 55,000 won Total: 155,000 won Compared with 144,000 won under the current method, this is a calculated increase of 11,000 won. Donating 20 Million Won Under the Most Preferential Conditions Assuming that the announced highest preferential rates apply to each bracket, the calculation is as follows. First 100,000 won: 100,000 won More than 100,000 won and at most 200,000 won: 100,000 won × 55.0% = 55,000 won Amount exceeding 200,000 won: 19.8 million won × 27.5% = 5,445,000 won Total: 5.6 million won Accordingly, the announced maximum tax credit would increase from the current 3,411,000 won to 5.6 million won. This is a theoretical maximum that assumes the highest preferential rates, a donation equal to the full annual limit, and sufficient final tax liability. Why Tax Credits and Thank-You Gifts Should Be Considered Separately The benefits of the Hometown Love Donation Program are divided into tax credits and thank-you gifts, which have different characteristics. Item Tax credit Thank-you gift Provider National and local tax settlement under tax law Local government receiving the donation Form Reduction in taxes payable Local products, services, and similar items Main limitations Affected by the donor’s final tax liability and other factors At most 30% of the donation amount; items vary by region Cash payment Not a separate cash reward In principle, a non-cash thank-you gift Therefore, the combined benefit of the tax credit and thank-you gift is closer to a conditional calculation, and the specific thank-you gift limit should be checked through Hometown Love e-Donation and the relevant laws and regulations. The donor must be able to use the full tax credit on the first 100,000 won, the local government must offer a thank-you gift up to the maximum limit, and the donor must be able to use that gift as valuably as its stated value. Practical Items to Check Before Donating Choosing a donation recipient based only on regional tax credit rates may produce a different result in practice. It is safer to check the following items as well. Residence restriction: Confirm that the recipient is not the metropolitan-level or municipal-level local government where the donor’s registered residence is located. Applicable year: Based on the donation date, confirm whether the current program or the reformed program applies. Regional category: Check the official classification to determine which of the four categories includes the relevant local government. Final tax liability: Determine whether there is sufficient tax to offset through year-end tax settlement or a comprehensive income tax return. Annual cumulative amount: Even if donations are divided among multiple local governments, the annual limit is managed on a combined basis. Thank-you gift conditions: Check the available items, required points, eligible delivery areas, and inventory. Donation records: Reconfirm through the simplified year-end tax settlement service or tax filing records whether the donation data has been linked to the National Tax Service. Risks to Consider Before Regional Preferential Rates The purpose of the reform proposal is to encourage private donations to regions with relatively difficult fiscal conditions. However, donors do not immediately receive cash equal to the tax credit rate, and the amount of tax savings varies by individual. In particular, income deductions should not be confused with tax credits. An income deduction reduces taxable income, while the Hometown Love Donation tax credit deducts a specified amount from the calculated tax. However, if the donor’s final tax liability is insufficient, the donor may not fully realize the announced maximum credit. In addition, donations made in advance with the 2027 reform proposal in mind cannot be assumed to qualify retroactively. Eligibility must be determined based on the effective date and supplementary provisions of the final law, as well as the actual donation date. Where to Check the Finalized Details Eligible donation regions, annual donation records, and thank-you gifts can be checked through the official Hometown Love e-Donation platform. For tax credit rates and implementation dates, donors should review both the laws related to Hometown Love Donations and the Restriction of Special Taxation Act on the National Law Information Center, along with finalized government guidance. A tax reform proposal at the government announcement stage is not the same as a law currently in effect. Anyone planning to donate in 2027 should base the decision on the tax credit guidance displayed on the official portal immediately before donating and the tax laws applicable for that year. FAQ Q. Can donations under the Hometown Love Donation Program be made only to one's hometown? A. No. Despite the name, it does not have to be one's birthplace or actual hometown. Individuals may choose to donate to any local government other than the metropolitan or basic local government corresponding to their registered place of residence. Q. What is the annual limit for Hometown Love Donations? A. The combined annual donation limit is 20 million won per individual. Even if donations are divided among multiple local governments, the limit applies to the total amount donated. Q. Starting in 2027, will 27.5% apply to all donations to non-capital regions? A. No. In the announced proposal, 27.5% is the highest preferential rate presented for the portion exceeding 200,000 won in other preferential non-capital regions. The final laws and regulations and official regional classifications must be checked for the regions and conditions that will actually apply. Q. Can anyone receive the maximum tax credit of 5.6 million won? A. No. The 5.6 million won figure is calculated on the assumptions that the annual limit of 20 million won is donated to a region eligible for the highest preferential treatment, the announced highest credit rate applies, and the donor has sufficient final tax liability to utilize the credit. Q. Does a tax credit mean that the donation is returned in cash? A. A tax credit reduces the income tax and local income tax payable; it does not guarantee separate cash compensation. It may result in a refund depending on taxes already paid and the final tax liability, but the outcome varies by individual. Q. Can a return gift be received separately from the tax credit? A. Yes. Local governments may provide return gifts within statutory limits, and the specific limits should be checked on Hometown Love e-um and in the relevant laws and regulations. Items, points, inventory, and delivery conditions vary by local government. Q. Does donating 100,000 won always result in benefits worth 130,000 won? A. That cannot be stated conclusively. The donor must have sufficient final tax liability to fully utilize the 100,000 won tax credit, and return gifts must be selected from among the items offered by the local government and within the applicable limits. The stated value of a return gift also does not necessarily have the same cash value to the donor. Q. Will the new preferential rates also apply to amounts donated in 2026? A. The announced direction is a proposal targeting implementation in 2027, so it cannot be considered retroactively applicable to donations made in 2026. The effective date and supplementary provisions of the final law must be checked. Q. Do donation records need to be submitted separately during year-end tax settlement? A. Donation records in the official system are generally linked to National Tax Service data, but it is advisable to check whether they have been reflected in the simplified year-end tax settlement data or comprehensive income tax return data in case any records are omitted. Q. Can corporations also receive a tax credit for Hometown Love Donations? A. Only individuals may donate under the Hometown Love Donation Program, and donations in the name of a corporation are not permitted. The tax credit also applies based on the individual who actually made the donation. Sources - Hometown Love e-um: https://ilovegohyang.go.kr/ - National Law Information Center Act on Hometown Love Donations: https://www.law.go.kr/법령/고향사랑기부금에관한법률 - National Law Information Center Restriction of Special Taxation Act: https://www.law.go.kr/법령/조세특례제한법 Images - Woman using a tablet terminal beside gift boxes of pears and dates in a fruit shop: https://injoys.com/rails/active_storage/blobs/proxy/eyJfcmFpbHMiOnsiZGF0YSI6MTA3MzMsInB1ciI6ImJsb2JfaWQifX0=--5546ac23000fd49c1048f5ddef1e5daf45cefe74/ai-3a51bcd8.webp - Infographic of a South Korea map linking donation coins to local offices, gifts, and a tax credit chart: https://injoys.com/rails/active_storage/blobs/proxy/eyJfcmFpbHMiOnsiZGF0YSI6MTA3NDEsInB1ciI6ImJsb2JfaWQifX0=--4c7b693bd60b757b384e5fb111fdf6b734cde059/ai-c5aceca0.webp --- Category: Policy Guide Source: https://injoys.com/en/articles/hometown-donation-tax-credit-2027-regional-rates License: cc_by Translation-Status: reviewed