Legislative Change: What Taiwan Did and Why
On August 21, 2026, Taiwan’s Legislative Yuan passed amendments to Articles 17 and 126 of the Income Tax Act designed to reduce the tax burden on families with children.(mof.gov.tw) The reforms are part of a broader strategy aimed at addressing declining birth rates, under the government’s “Family Support” policy. Benefits include:
- Increasing the child tax exemption for children under 18 by 50%, from NT$101,000 to NT$151,500 per child.(mof.gov.tw)
- Allowing parents of children aged six or younger to stack the new exemption with existing preschool special deduction: first child enjoys a preschool deduction of NT$150,000, second and subsequent NT$225,000, plus the increased exemption. This substantially raises the deductible amount available.(mof.gov.tw)
- Adjusting insurance premium deductions: insurance premiums paid under labor insurance, national health insurance, public servants’ insurance, etc., no longer subject to the existing NT$24,000 cap within itemised deductions.(mof.gov.tw)
These changes apply to tax filings in May 2027 for the 2026 tax year (“115年度”).(mof.gov.tw)
Impacts for Households: Who Benefits Most
- Families with multiple young children (especially two or more) will see substantial tax reductions. For example, owning two children under six, previously limited by preschool deduction and exemption caps, can now claim deduction + exemption of up to NT$376,500 total.
- Upper income families paying high insurance premiums will also benefit thanks to the removed cap on deduction.
- Anticipated number of beneficiaries: approx. 2.37 million people, and the total tax relief estimated at NT$8 billion.(mof.gov.tw)
Actionable Steps for Families
- Claim new exemption/deduction: When filing in May 2027, ensure you apply for the raised child exemption and preschool special deduction together for children aged ≤6.
- Rework withholding or estimated tax payments if you are an employee: the employer or tax authority may update withholding tables once law is promulgated—check your monthly paycheck deductions.
- Compile insurance premium receipts from all eligible mandatory insurance programs–prioritize documentation.
- Talk with your accountant if you itemize deductions—this change may alter whether standard vs itemised makes more sense.
Example Scenarios
| Family Type | Before Reform | After Reform (for 2026 filings) |
|---|---|---|
| One child, aged 4 | Child exemption NT$101,000; preschool deduction NT$150,000 ⇒ combined ~ NT$251,000 deduction/exemption | Exemption now NT$151,500 + same preschool deduction ⇒ ~ NT$301,500 total—NT$50,500 more relief. |
| Two children aged 2 & 7 | Exemptions for both (2 x NT$101,000); only first child preschool deductible | Both get increased exemption (2 x NT$151,500); only child aged ≤6 gets preschool deduction of NT$150,000 ⇒ ~ NT$302,000 total. |
| High insurance contribution payer | Previously capped at NT$24,000 deductible, but likely hit ceiling | No cap → full eligible amounts deductible—greater savings depending on amounts paid. |
Key Takeaways
- The reform is significant for young families and those paying large social insurance premiums.
- Document early: gather insurance receipts; keep child enrolment dates.
- Evaluate whether standard or itemised deduction route is optimal post-change.
- Although effective for 2026 filings, stay alert to tax authority guidance and updated forms.