The basic living expense tax deduction for 2021 has been raised to NT$192,000, and will be applicable for the next tax season when individuals file their income taxes, according to the Executive Yuan on Thursday.
Citing Premier Su Tseng-chang, Executive Yuan spokesman Lo Ping-cheng told reporters following a Cabinet meeting that about 2.1 million households in Taiwan are expected to benefit from the upward adjustment.
It is the fifth consecutive year the deduction for the basic living expense has been raised, Lo added.
Taiwan’s 2017 Taxpayer Rights Protection Act stipulates that individuals should not be taxed on the amount they need to cover basic expenses, which is set at 60 percent of median disposable per capita income the preceding year.
According to a survey of family income released by the directorate general of Budget, Accounting and Statistics on August 13, the median disposable income was estimated at NT$320,000 (US$11,392).
Based on the NT$192,000 figure, the basic living expense for 2021, which applies to taxpayers and each of their dependents, would be NT$10,000 higher than it was in 2020.
Under the existing tax system, when the basic living expense exceeds the combined personal exemption, standard deduction and special deductions, the difference can be taken out of the taxpayer’s gross income.
So for a family of four, the extra NT$40,000 cushion provided by the higher basic living expense standard would give an income tax saving of NT$500 at a tax rate of 5 percent, which equates to a combined saving of NT$2,000.
Also during the Cabinet meeting Thursday, Premier Su announced that Taiwan’s minimum monthly and hourly wage will be raised by 5.21 percent, effective January 1, 2022.
As a result, the minimum monthly wage will be increased from NT$24,000 to NT$25,250 and the minimum hourly wage from NT$160 to NT$168.
The hike, the sixth consecutive yearly increase, was proposed by the Minimum Wage Review Committee of the Ministry of Labour last week.
Lo said the hikes will benefit about 2.45 million workers in Taiwan, of which roughly 2 million are Taiwanese.
According to the committee last week, the increase in basic wages will also apply to migrant workers in the manufacturing, ocean fishing, construction, and institutional nursing sectors, but not to caregivers or home help employed by families.