Yuanlin Office, National Taxation Bureau of the Central Area, Ministry of Finance indicated that the filing season for individual income tax is rapidly approaching. People are calling to ask why, despite the fact that the itemized deductions have been listed, the tax amount has not been affected. Following an investigation into the causes, it was determined that it could be attributable to the influence of the basic living expense.
The "basic living expense" refers to the expenses required to sustain a basic standard of living and is not taxed by the Revenue Service Office. The total amount of basic living expenses for a household is calculated in accordance with the basic living expense per person in the current year announced by the Ministry of Finance multiplied by the number of persons in the household, including the taxpayer, spouse, and dependents. If the total amount of basic living expense is higher than 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, and special deduction for long-term care), the basic living expense difference can be used as an additional deduction from the gross consolidated income.
Assuming a family of five has the gross consolidated income of NT$ 1,000,000 in 2021 and adopts the standard deduction, its total basic living expense in 2021 is NT$ 960,000 (NT$ 192,000 * 5 persons), which exceeds the total amount of exemption and deduction of NT$ 710,000 (including the exemption amount of NT$ 440,000, standard deduction of NT$ 240,000, and NT$ 30,000 for the special deduction for savings and investment). The household could deduct the difference of NT$ 250,000 (NT$ 960,000- NT$ 710,000) from the gross consolidated income. After deducting the gross consolidated income, the declaring household's tax payable is NT$ 2,000 ((NT$ 1,000,000 - NT$ 710,000-NT$ 250,000) * 5%). If the taxpayer makes a donation, the listed itemized deductions increase to NT$ 450,000. Since the total amount of exemption and deduction of NT$ 920,000 is less than the total basic living expense. The difference in the basic living expense of NT$ 40,000 (NT$ 960,000 - NT$ 920,000) must still be deducted. Furthermore, the tax payable is NT$ 2,000 ([NT$ 1,000,000 - NT$ 920,000 - NT$ 40,000] * 5%). In the above two scenarios, regardless of whether the standard deduction or the listed itemized deductions is used, the basic living expense difference will be used to protect the basic living expense from being taxed.
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Information provided by Miss Tsai-Chen Yang of Individual Income Tax Section, TEL: 04-8332100 Ext. 202).