Annual IIT Planning (Annual IIT Planning Guide) Guide 2026
Individual income tax (IIT) is a "compulsory tuition fee" for every salary earner. But through legal and compliant approaches, you can definitely reduce your tax burden and keep more income in your own pocket. This article summarizes the latest IIT policies in 2026 and 10 practical planning tips.
1. IIT Policy Review for 2026
China's individual income tax adopts the annual reconciliation of comprehensive income system, which combines four items — wages and salaries, labor remuneration, author's remuneration, and royalties — into a single calculation.
2026 Comprehensive Income Tax Rate Table
| Level | Annual taxable income | Rate | Quick deduction |
|---|---|---|---|
| 1 | Up to ¥36,000 | 3% | 0 |
| 2 | ¥36,001-144,000 | 10% | 2,520 |
| 3 | ¥144,001-300,000 | 20% | 16,920 |
| 4 | ¥300,001-420,000 | 25% | 31,920 |
| 5 | ¥420,001-660,000 | 30% | 52,920 |
| 6 | ¥660,001-960,000 | 35% | 85,920 |
| 7 | Over ¥960,000 | 45% | 181,920 |
Annual taxable income = Comprehensive income − ¥60,000 basic deduction − special deductions − special additional deductions − other deductions
2. 10 Practical Planning Tips
1 Make Full Use of Special Additional Deductions Save ¥0-15,000/year
This is the "tax dividend" most easily overlooked by ordinary people. Be sure to declare them in the Individual Income Tax App:
- Children's education: ¥2,000/month/child (raised since 2023)
- Continuing education: ¥400/month (academic) or ¥3,600/year (professional certificate)
- Mortgage interest: ¥1,000/month, for 30 years
- Housing rent: ¥800-1,500/month (by city)
- Supporting the elderly: up to ¥3,000/month
- Infant and toddler care: ¥2,000/month/child (children under 3)
- Critical illness medical: the portion exceeding ¥15,000 after medical-insurance reimbursement, up to ¥80,000
2 Choose the Annual Bonus Taxation Method Save up to tens of thousands of yuan
The annual one-time bonus can be taxed under either separate taxation or combined with comprehensive income — choose whichever is more favorable:
| Situation | Recommended choice |
|---|---|
| Comprehensive income < ¥36,000 | Combined with comprehensive income |
| Comprehensive income > ¥36,000 and a large annual bonus | Separate taxation |
| Comprehensive income > ¥300,000 | Try calculating both methods |
💡 In the "Individual Income Tax" App you can calculate both methods separately first and choose the one that results in less tax.
3 Personal Pension Account Save ¥3,600-5,400/year
Under the personal pension scheme launched in 2023, up to ¥12,000 per year can be deducted before tax.
- Suitable for: taxpayers with annual income above ¥100,000
- Tax saved: up to ¥12,000 × 30% = ¥3,600
- How to do it: open a personal pension account through a commercial bank
4 Commercial Health Insurance Save up to ¥2,400/year
Purchase qualified tax-preferential commercial health insurance; up to ¥2,400 per year can be deducted before tax.
5 Contribute More to the Housing Provident Fund Depending on your salary level
The personal contribution portion of the housing provident fund can be deducted before tax. If your income allows, you can ask your employer to raise the contribution ratio (up to 12%).
6 Charitable Donations Up to 30% deductible
Charitable donations made through compliant channels can be deducted within 30% of taxable income — doing good while saving tax.
7 Flexibly Arrange Labor Remuneration Depending on circumstances
If you have labor remuneration income, you can:
- Collect it in monthly installments to avoid concentrating it in a single month
- Allocate it reasonably across different years
8 Equity Incentive Tax Planning For executives
Equity incentives from listed companies have a separate preferential taxation policy — make full use of it.
9 Individual Businesses / Small and Micro Enterprises For entrepreneurs
If you are a freelancer or entrepreneur, you can consider registering an individual business:
- Assessed collection: the overall tax burden can be as low as 3-5%
- Reasonably itemize operating costs
- Enjoy tax preferences for small and micro enterprises
10 Take Equity Instead of a High Salary Long-term benefit
For core staff of startups, you can consider lowering cash salary and increasing equity; when the equity is exited, it is taxed at a 20% rate, far lower than the top 45% salary tax rate.
3. Case Study: Choosing the Annual Bonus Taxation Method
Suppose Xiao Wang has an annual income of ¥300,000 (after social insurance and housing provident fund deductions) and an annual bonus of ¥50,000:
| Taxation method | Comprehensive income tax | Annual bonus tax | Total |
|---|---|---|---|
| Separate taxation | ¥28,580 | ¥4,790 | ¥33,370 |
| Combined with comprehensive income | ¥42,780 | — | ¥42,780 |
| Savings | ¥9,410 | ||
Choose the right taxation method, and you save nearly ¥10,000 a month!
👉 Try the IIT calculator
4. Common Misconceptions
- ❌ Falsely issuing invoices to offset tax
- ❌ Hiding income and failing to report tax
- ❌ Buying fake "tax avoidance schemes"
- ❌ Using sole proprietorships to falsely issue invoices
Legal tax saving vs tax evasion — do not cross the red line. It is recommended to plan under the guidance of a professional tax advisor.
5. Annual Reconciliation Timeline
- March 1 - June 30: annual reconciliation of comprehensive income for IIT
- January - March: make an appointment (before February 16)
- Handling it through the "Individual Income Tax" App is the most convenient
6. Summary: The 3 Things Average People Should Do
- ✅ Declare all special additional deductions (the simplest and most certain way to save tax)
- ✅ Calculate both annual bonus taxation methods (you can re-choose every year)
- ✅ Open a personal pension account (a double benefit of long-term savings + tax saving)
Reasonable and legal tax planning is not "tax evasion" but "making full use of the policies." The tax you save is your extra income.
Use the IIT calculator to estimate your tax