It’s frustrating to see a big chunk of your earnings disappearing into the government’s coffers. Thankfully, there are valid and simple ways to reduce your taxable income in Singapore. Making the most of these deductions can help you save for things like retirement or a comfortable early retirement or put money back into your own education.
How Income Tax Works
Earning more money in Singapore results in a higher tax burden due to the country’s progressive income tax structure. Discovering expenses that can be deducted or are eligible for tax relief is the goal. While there are a number of avenues open to you, the amount of money you can save in taxes is capped for individuals. You can only receive a total of S$80,000 in tax relief in any given assessment year.
Take a look at some easy tips that could help you pay less in taxes next year.
1) Look after your elderly parents
Nine out of ten people between the ages of 25 and 34, according to a recent survey, want to provide financial support to their aging parents. The ‘Parent Relief’ plan, which provides tax relief to Singaporeans who take care of their elderly parents, is another measure the government has taken to encourage this practice. The advantages of the Parent Relief program include:
The combined value of QCR, HCR, and WMCR is capped at $50,000 per kid. Under WCMR, working moms can only receive a maximum tax credit equal to 100% of their income from the previous fiscal year.
A Grandparent Caregiver Relief (GCR) of $3,000 is available to working mothers who have a parent, parent-in-law, grandparent, or grandparent-in-law caring for one or more of their children aged 12 or younger.
In case you forgot, the Parenthood Tax Rebate is not a deduction against your taxes but rather a cash payment back to your income tax.
Each newborn is eligible for PTR once in the calendar year following their birth.
2. Relationships take a lot of effort and it's not easy to keep them
Funding your retirement accounts is the simplest way to benefit from tax breaks. All of the funds you put away in your CPF and SRS (Supplementary Retirement Scheme) accounts are 100% tax deductible.
Adding to your CPF balance:
All contributions to your CPF Special Account are tax deductible up to the annual maximum of $7,000. If you contribute to the CPF SA/RA accounts of your parents, in-laws, siblings, spouse, etc., you’ll be eligible for additional tax breaks of up to $7,000.
Contribute to your Supplementary Retirement Scheme:
SRS might be viewed as a form of voluntary CPF. It’s a chance to put away money for the future and watch it increase as you near retirement. You can get a deduction from your taxable income that is equivalent to the amount you put into the Supplemental Retirement Scheme. Withdrawals from your SRS account can begin after you reach the age of 62. The good news is that half of these withdrawal sums won’t be subject to taxes.
3) Contribute donations to charities
Any cash donations given to charities qualify for a tax deduction of 2.5 times the amount given if they are made to a qualified Institution of a Public Character (IPC) or the Singapore Government. As a result, if you gave away $2,000 last year, you’d have $3,500.00 less to pay in taxes.
It may be months before tax season, but the proverb about the early bird holds true. If you want to save the most money possible on your taxes, you should start figuring and planning right away. Finally, keep in mind that the annual tax relief you can receive is capped at $80,000, so make your investment and savings plans appropriately.
We wish you the best of luck and many years of contentedly saving.