Tax-deductible allowance for living costs may be raised by NT$3,000

Taipei, Aug. 16 (CNA) The annual tax-deductible allowance for basic living expenses could be raised to NT$213,000 (US$7,092) per person for tax filers in 2026, according to the Directorate-General of Budget, Accounting and Statistics (DGBAS) on Friday.

In its presentation of the 2024 household income and expenditure survey, the DGBAS said median disposable income per capita was NT$355,617, up 1.9 percent from the previous reporting year.

Using this figure, the tax-deductible allowance for basic living expenses per person should end up at around NT$213,000 for 2025 income tax purposes, a NT$3,000 increase from NT$210,000 in 2024, the statistics agency said.

According to the Taxpayers' Rights Protection Act passed in 2017, Taiwan's government shall not tax the amount individuals need for basic necessities, which is set at 60 percent of median per capita disposable income from the preceding year.

The Ministry of Finance (MOF) said the exact figure for the adjusted tax-deductible allowance for basic living expenses will be officially announced at the end of 2025.

Under Taiwan's tax system, if the basic living expenses allowance exceeds the sum of the personal exemption, standard deduction, and special deductions given to all taxpayers in Taiwan, the difference can be deducted from the taxpayer's gross income.

This allowance is generally used by households with children filing taxes, because for single taxpayers and couples without dependents, the combined total of the basic exemption and standard and special deductions is usually more favorable.

PwC Taiwan accountant Hung Lien-sheng (洪連盛) said that if the tax-deductible allowance for basic living expenses were increased by NT$3,000, a family of four consisting of a married couple and two underage children would see their total basic living expenses rise by NT$12,000.

That would effectively mean that an additional NT$12,000 of income would be tax-exempt, Hung said.

If the applicable income tax rate for such a household were 12 percent, they could save NT$1,440 in taxes, Hung said, and if the applicable tax rate were 20 percent, they would pay NT$2,400 less in taxes.