5 Ways To Lower Your Personal Tax
So it’s time to get your taxes squared away again. No one likes having to part with some of their income for the “benefit of society”, but it happens anyways. Instead of eating your heart out over this, focus your efforts on searching for ways to intelligently (and legally) lower the amount of taxes you pay. Here are 5 ways to get you started.
1) Contributing to your Medisave Account
If you make a voluntary contribution to your Medisave account, you are allowed to claim for tax reliefs. So essentially, you’re lowering your taxes while setting aside funds that go towards your healthcare needs. An obvious win-win situation. However, there are certain requirements you need to fulfil. According to the IRAS, you may claim tax relief for your voluntary Medisave contributions if:
You are a Singapore Citizen or Permanent Resident;
You have made voluntary contributions to your Medisave account in the previous year; and
You derived any source of income in the year you made the voluntary contributions.
2) Making a donation to a charity
Another way to lower your taxes is to make a donation to an approved Institution of a Public Character (IPC) of your choice. Good news here is that if you made a donation within the period of 1 January 2015 to 31 December 2015, you will qualify for a tax deduction of 300% of the amount. Don’t fret if you’ve missed this window of opportunity though. Donations made within the period of 1 January 2016 to 31 December 2018 will still qualify for a tax deduction of 250%. As cliché as it may sound, you may want to consider helping yourself by helping others. For more details about this tax relief, check out the IRAS website.
3) Making use of the Parenthood Tax Rebate
For your valiant efforts in dealing with things like dirty diapers, incessant yelling, and teenage angst, you are presented with an opportunity to lower your taxes with the Parenthood Tax Rebate. However, to qualify for this, you must be a married/divorced/widowed Singapore tax resident. Other conditions include:
First child born/adopted on 1 January 2008 or later
OR more than one child born/adopted on 1 January 2004 or later.
Tax rebates range from $5,000 to $20,000. You can decide how to share the rebate with your spouse.
4) Claiming for parent relief/handicapped parent relief
To encourage filial piety, the government grants tax reliefs to those supporting their parents, grandparents, parents-in-law, or grandparents-in-law. The dependent must be living in your household in Singapore, obviously. If he/she lives elsewhere, you must have incurred $2,000 or more supporting them in 2015. They must also be at least 55 years of age in 2015 or physically/mentally disabled, and not have an annual income exceeding $4,000. The IRAS provides a complete breakdown of relief provided but it ranges from $4,500 to $14,000 per dependant.
5) Voluntarily making cash top-up to (CPF) Central Provident Fund accounts.
Another way to lower your personal taxes is to make cash contributions to your CPF Special Account (if you’re under 55) or to your Retirement Account (if you’re over 55). This is probably a good way, although some may disagree, to set aside money for your future financial needs. You will also be able to claim tax relief if you have contributed to the accounts of your loved ones. However, where spouses and siblings are concerned, their annual income in the year preceding the contribution must not exceed $4,000. The maximum amount for this tax relief is $14,000 ($7,000 for self and $7,000 for loved ones).