The Yuanlin Office of the National Taxation Bureau of the Central Area, Ministry of Finance, stated that some taxpayers have inquired why an increase in itemized deductions did not reduce their tax liability. An investigation revealed that it was due to the impact of the "basic living expense.”
It further explained that the so-called "basic living expense" refers to the minimum amount required to maintain a basic standard of living. This is determined annually by the central competent authority, based on 60% of the national median per capita disposable income, as announced by the Directorate-General of Budget, Accounting and Statistics. According to the Ministry of Finance, the basic living expense for 2024 was NT$210,000 per person. By multiplying this amount by the number of members in the tax household (including the taxpayer, spouse, and dependents), the total basic living expense for the household can be calculated. If this amount exceeds the sum of exemptions and deductions (including standard deduction or itemized deductions, special deduction for savings and investment, special deduction for the disabled, special deduction for tuition, special deduction for pre-school children, special deduction for long-term care, and special deduction for rent for housing),the difference may be deducted from the household's gross consolidated income.
The office gave an example of a four-member household (taxpayer, spouse, and parents under the age of 70, all without disabilities) with a gross consolidated income of NT$1,000,000 in 2024. Using the standard deduction, the total basic living expense in 2024 was NT$840,000 (NT$210,000 × 4 people), the total exemptions and deductions amount to NT$700,000 (including exemptions NT$388,000, standard deduction NT$262,000, and NT$ 50,000 for the special deduction for savings and investment). The difference of NT$140,000 (NT$840,000－NT$700,000) can be deducted from the gross consolidated income, resulting in a tax payable of NT$8,000 (NT$1,000,000－NT$700,000－NT$140,000) × 5%. If the taxpayer makes a donation, increasing the itemized deductions to NT$302,000, the total of exemptions and deductions increases to NT$740,000. The difference of NT$100,000 (NT$840,000－NT$740,000) can be deducted. Furthermore, the tax payable still remains NT$8,000 (NT$1,000,000－NT$740,000－NT$100,000) × 5%. In both scenarios, although the taxpayer chose to use itemized deductions, the total of exemptions and deductions still did not exceed the total basic living expense. Therefore, even though the itemized deductions increased, the basic living expense difference that could be deducted from the gross consolidated income decreased accordingly, resulting in no change to the amount of tax payable.
If you have any questions, please call our toll-free service number 0800-000321 for consultation, and we will do our best to serve you.
Contact person: Individual Income Tax Section, Ms.Yu
Tel: (04)8332100 ext. 202.