In Case You Didn’t Know, These 4 Things Lower Your Taxes in Singapore
Sweeping statements are usually inaccurate, but we think we can quite safely say that nobody likes to pay taxes. Try telling that car owner that by renewing his COE he’s contributing to society and he’ll run you over with his car.
Paying income tax can be particularly painful, so it makes sense to take advantage of as many forms of tax relief or rebates as possible. Here are some things you perhaps didn’t know could lower your income tax.
Parenthood tax rebate
In line with the government’s efforts to encouraging childrearing, parents in Singapore get to enjoy something known as the Parenthood Tax Rebate. To qualify, your first child has to be born on 1 Jan 2008 or later, OR you have to have more than one child born after 1 Jan 2004. Your tax rebate can range from $5,000 to $20,000, amounts that can be split between your spouse in any way you like.
It pays to be generous. Make a cash or share donation to an approved organisation and you get to enjoy tax deductions. You also enjoy tax deductions when you donate computers to approved educational or research institutions and artefact donations to museums.
Time to start thinking about whether that ancient Nokia 8210 counts as an artefact. This year, the tax deduction for eligible donations has been raised to 300% from 250% to coincide with SG50. From 2016, the deduction rate will revert to 250%.
CPF Cash Top-Up
If you’ve made voluntary cash top-ups to your own CPF Special Account (if you’re under 55) or Retirement Account (if you’re over 55), or you top up your parents’, grandparents’ or spouse’s CPF Special or Retirement Accounts in accordance with the CPF Retirement Sum Topping-Up Scheme, you get to claim up to $7,000 of tax relief according to how much cash you’ve injected into the CPF system.
Maintenance of parents
If you’re supporting your parents, grandparents or in-laws, you too might be entitled to a bit of tax relief. Of course, if your parents are tycoons, you don’t get squat. Either your parent(s) have to be living with you, or you have to have spent at least $2,000 supporting him/her that year.
The parent in question also has to be 55 years old and above or physically or mentally disabled, and have an income of not more than $4,000 a year. You can claim up to $9,000 per parent if you live together or $5,500 per parent if you don’t. The amount rises to $14,000 and $10,000 respectively if your parent is handicapped.
How to claim tax relief
Claiming tax relief is easier than it sounds. When you do your IRAS e-filing, just access the “Total Deductions and Reliefs” section, where you can simply enter the form of relief you wish to apply for and fill in the details. The system will then automatically apply the tax deduction to your final amount.
For tax deduction in certain categories such as donation, you won’t have to lift a finger as the system will have logged the deduction amount you’re entitled to ahead of time.
A tax deduction basically reduces the amount of income you need to pay taxes on. For instance, if you earn $3,500 a month, your taxable income for that year is $42,000. $690 worth of taxes is payable on that amount.
Now, let’s say you receive a tax deduction of $7,000. You subtract this figure from your taxable income for the year, leaving you with $35,000 of taxable income. This means you now only have to pay $375 in taxes.
Of course, the actual amount you end up paying is likely to be far less. For one thing, all Singaporeans get a 50% tax rebate of up to $1,000 in celebration of SG50. This means even more of your hard earned cash gets to stay where it belongs—in your pocket.
Which of the above categories have you ever claimed tax relief under? Tell us in the comments!