2026 Tax Deduction Guide: All Seven Allowances Explained
China's seven special additional deductions are the easiest money a salaried employee can claim and the easiest money to lose. In 2026 the seven allowances keep the raised limits, and a household with one child, a first-home mortgage and dependent parents can remove CNY 54,000 from taxable income every year. At a marginal rate of 10% to 25%, that is CNY 5,400 to 13,500 back annually.
The money does not arrive automatically. You have to confirm the information, decide which spouse claims each item, and know which allowances stack and which are mutually exclusive. This guide uses the 2026 published limits to lay out all seven items, the tax arithmetic behind them, the allocation decision within a marriage, and a claim checklist you can copy.
1. The Seven Allowances at a Glance
| Allowance | 2026 standard | Who claims it | Conditions |
|---|---|---|---|
| Children's education | CNY 2,000 per month per child | Each parent 50%, or one parent 100% | From age 3 until full-time education ends |
| Infant and toddler care (under 3) | CNY 2,000 per month per infant | Each parent 50%, or one parent 100% | From the month of birth to the month before the third birthday |
| Continuing education | Academic study CNY 400/month (max 48 months); professional qualification CNY 3,600 in the year obtained | The taxpayer | Domestic academic continuing education, or a listed professional certificate |
| Major medical expenses | Out-of-pocket above CNY 15,000, capped at CNY 80,000 per year | Taxpayer or spouse; parents may claim for a minor child | Claimed only at the annual settlement, on actual receipts |
| Housing loan interest | CNY 1,000 per month, up to 240 months | One spouse, by agreement | First-home mortgage |
| Housing rent | CNY 1,500 / 1,100 / 800 per month, by city tier | One spouse only when both work in the same city | No owned home in the main city of work |
| Elderly care | CNY 3,000 per month for an only child; shared among siblings at up to CNY 1,500 each | Only child claims alone; siblings agree or split evenly | The dependant is 60 or older |
Housing rent splits by city tier: CNY 1,500/month for municipalities, provincial capitals and cities with separate state planning; CNY 1,100/month where the urban population exceeds one million; CNY 800/month below that.
Three rules catch people out. Housing loan interest and housing rent are mutually exclusive. Elderly care is calculated per dependant, not per elderly person, so supporting both parents does not double the allowance. And major medical expenses can only be claimed at the annual settlement, never through monthly withholding.
2. Allowance × Marginal Rate = What You Actually Save
A deduction does not reduce tax directly. It reduces taxable income, and the bracket table decides how much tax that removes. China's comprehensive income uses seven progressive brackets:
| Bracket | Annual taxable income | Rate | Quick deduction |
|---|---|---|---|
| 1 | Up to CNY 36,000 | 3% | 0 |
| 2 | CNY 36,000 – 144,000 | 10% | 2,520 |
| 3 | CNY 144,000 – 300,000 | 20% | 16,920 |
| 4 | CNY 300,000 – 420,000 | 25% | 31,920 |
| 5 | CNY 420,000 – 660,000 | 30% | 52,920 |
| 6 | CNY 660,000 – 960,000 | 35% | 85,920 |
| 7 | Above CNY 960,000 | 45% | 181,920 |
The key relationship is simple: every CNY 1 of deduction saves exactly your marginal rate in tax. The same CNY 1,000 deduction is worth CNY 30 in the 3% bracket and CNY 300 in the 30% bracket — a tenfold difference.
| Marginal rate | 3% | 10% | 20% | 25% | 30% | 35% | 45% |
|---|---|---|---|---|---|---|---|
| Tax saved per CNY 1,000 deducted | 30 | 100 | 200 | 250 | 300 | 350 | 450 |
3. Annual Value of Each Allowance
Converting the monthly standards into annual amounts shows how much each item is really worth. The final column assumes a 25% marginal rate and is meant only for ranking:
| Allowance | Annual deduction | Maximum annual saving at 25% |
|---|---|---|
| Elderly care (only child) | CNY 36,000 | CNY 9,000 |
| Children's education (one child) | CNY 24,000 | CNY 6,000 |
| Infant care under 3 (one infant) | CNY 24,000 | CNY 6,000 |
| Housing rent (top tier) | CNY 18,000 | CNY 4,500 |
| Housing loan interest | CNY 12,000 | CNY 3,000 |
| Continuing education (academic) | CNY 4,800 | CNY 1,200 |
| Continuing education (qualification) | CNY 3,600 (one-off) | CNY 900 |
| Major medical expenses | Up to CNY 80,000, on receipts | CNY 20,000 |
The theoretical ceiling stacks well above CNY 100,000, but most households land between CNY 60,000 and CNY 100,000. The ranking matters for triage: check the large items first, and do not spend your attention on a CNY 3,600 certificate while missing a CNY 36,000 elderly care claim.
4. How a Couple Should Split the Allowances
Children's education, infant care and housing loan interest all involve a "who claims it" decision. The rules: children's education and infant care can be split 50/50 or claimed entirely by one parent, while housing loan interest goes entirely to one spouse. The allocation principle is single: put the deduction where the marginal rate is higher.
| Allocation | Arithmetic | Combined annual saving |
|---|---|---|
| Split 50/50 | 12,000 × 20% + 12,000 × 10% | CNY 3,600 |
| All to the 20% spouse | 24,000 × 20% | CNY 4,800 |
| Difference | — | CNY 1,200 per year |
If both spouses sit in the same bracket, the split makes no difference. When the brackets differ, concentrating the allowance saves real money. The same logic applies to mortgage interest: CNY 1,000 a month is worth CNY 2,400 a year in the 20% bracket and only CNY 1,200 in the 10% bracket.
5. What Else Reduces Taxable Income
Taxable income is computed in a fixed order: comprehensive income, minus the basic deduction, minus social insurance and housing fund contributions, minus other allowances, then minus the seven special deductions.
| Layer | Annual amount | Notes |
|---|---|---|
| Basic deduction | CNY 60,000 | The familiar CNY 5,000 monthly threshold; available to everyone |
| Social insurance and housing fund (employee share) | Actual contributions | Pension 8%, medical 2%, unemployment around 0.5%; varies by city |
| Enterprise or occupational annuity | Up to 4% of salary | Requires an employer-sponsored plan |
| Private pension | CNY 12,000 per year | Requires an opened private pension account and contributions |
| Special additional deductions | See section 1 | The seven allowances this guide covers |
| Charitable donations | Generally up to 30% of taxable income | Must go through an approved channel with receipts |
Stacked together, someone earning CNY 180,000 a year can push the taxable base down to just over CNY 40,000. That layered reduction — not the CNY 5,000 threshold alone — is what actually determines take-home pay.
6. Three Worked Examples
Example 1: a two-earner household on CNY 180,000. Social insurance and housing fund contributions come to CNY 24,000 a year, and the qualifying allowances are children's education CNY 24,000, housing loan interest CNY 12,000 and elderly care at the shared CNY 1,500/month rate (CNY 18,000) — CNY 54,000 in total. Without the special deductions the taxable base is 180,000 − 60,000 − 24,000 = 96,000, giving tax of 9,600 − 2,520 = CNY 7,080. With them the base falls to 42,000 and tax to 4,200 − 2,520 = CNY 1,680. The household keeps CNY 5,400 more, exactly 54,000 multiplied by the 10% marginal rate.
Example 2: CNY 300,000 income with the same deductions. Contributions are CNY 36,000. Without the allowances the base is 204,000 and tax 204,000 × 20% − 16,920 = CNY 23,880; with them the base drops to 150,000 and tax to 150,000 × 20% − 16,920 = CNY 13,080. The saving is CNY 10,800, double Example 1, because the marginal rate rose from 10% to 20%.
Example 3: CNY 480,000 income. Contributions are CNY 54,000. Without the allowances the base is 366,000 and tax 366,000 × 25% − 31,920 = CNY 59,580; with them the base falls to 312,000 and tax to 312,000 × 25% − 31,920 = CNY 46,080. The saving is CNY 13,500, matching the 25% marginal rate.
All three examples point the same way: the same deduction is worth more at a higher income. To run your own numbers, start with the tax calculator using your gross salary, contributions and allowances. If a year-end bonus is involved, compare the separate-bonus method against merging it into comprehensive income. For the mortgage side of the equation, see housing fund loan limits and city comparison.
7. Frequently Asked Questions
Can I claim both mortgage interest and rent?
No. They are mutually exclusive. Mortgage interest is CNY 1,000 a month, while rent reaches CNY 1,500 a month in a provincial capital or municipality, so renting is often worth more if you own no home in your city of work.
Does elderly care multiply with the number of parents?
No. The allowance covers the dependants as a group: CNY 3,000 a month for an only child, or a shared CNY 3,000 split among siblings at no more than CNY 1,500 each. Supporting two parents does not double it.
How should a couple split children's education?
One parent may claim 100%, or both may claim 50% each. Put it with the spouse in the higher bracket — on CNY 24,000 a year the difference between a 20% and a 10% spouse is roughly CNY 1,200 annually.
Does changing jobs mid-year break the deductions?
No. The allowances accumulate on an annual basis. After changing jobs, update the withholding agent in the tax app and the annual settlement reconciles everything at year end.
What if I miss the December confirmation window?
You can add or amend allowance information at any time. Claiming during withholding reduces tax immediately; claiming later means the refund arrives at the annual settlement instead.
Why don't major medical expenses appear in monthly withholding?
Because the allowance is claimed on actual receipts against an annual cap of CNY 80,000, it can only be assessed after the year closes, during the annual settlement.
How are the rent tiers decided?
By city: CNY 1,500 per month for municipalities, provincial capitals and separate-planning cities; CNY 1,100 where the urban population exceeds one million; CNY 800 below that.
Quick tip: run a mid-year allowance check rather than waiting for December. Adjusting a claim or an allocation mid-year changes your withholding immediately, which smooths cash flow far better than discovering an underpayment at filing time.