In Singapore, a progressive tax system is applied. This means that the more you earn, the more tax you pay.
Personal income tax is a tax levied on the income of individuals. The amount paid depends on the amount of money one makes in the previous year and is usually divided into tax brackets, so that those making more pay progressively higher rates.
Paying taxes is not fun and sometimes could be very stressful. We all want to keep as much of the money we make as possible, and fortunately, there are still some ways we can do to reduce our personal income tax.
It’s best to assess your income tax for the upcoming year and establish financial goals. For those who haven’t already done so, now is the perfect time to figure out how much you’ll owe taxes in 2023, rather than risking all of your cash on gambling and ruining your chances of good fortune.
Working Out on Your Taxes
You’re probably aware that your wage is subject to personal income tax. Bonuses are included, but CPF contributions are not. This is true whether you’re employed or freelancing. Rental income is also taxable if you are a landlord.
Most other kinds of income in Singapore are not taxed.
Dividends from your stocks, for example, are not subject to taxation, regardless of how big the payout is. Even if you made a million dollars from Bitcoin / flipping properties / other assets, there is no capital gains tax to pay.
If you’re unsure about the taxability of any of your other earnings, consult the IRAS website on Singapore’s tax laws.
For YA2023 (i.e. 1 January to 31 December 2022), you should begin arranging for tax relief as soon as you know how much your taxable income will be.
Singapore Income Tax Rates In 2022
Your taxable income will be taxed at the rates listed below. You can use this table to determine how much money you’ll need to save for next year:
Supplementary Retirement Scheme (SRS) Tax Relief and CPF Top Ups
If you haven’t already started saving for retirement, tax breaks are just the best compelling reason to do so. It’s easy to reduce your taxable income by topping up your CPF and Supplementary Retirement Scheme (SRS) funds. Here are some possible tax breaks for which you may be eligible.
Increasing your retirement savings is the most straightforward and well-known method to reduce your taxable income. You get $1 deducted from your taxable income for every $1 that you deposit in each of these accounts. Yet for the year 2022, it is too late to minimize your tax burden in this manner. Any CPF contributions should have been made before December 31, 2021.
CPF Top-Up: The CPF Retirement Sum Topping-Up Scheme allows Singaporeans and Permanent Residents who have paid voluntary CPF cash top-ups to their own Special Account (if they are under 55) or Retirement Account (if they are 55 and beyond) in the prior year to claim a CPF cash top-up relief of up to $8,000.
You can deduct up to $8,000 of your chargeable income when you make a CPF top-up to your Special Account. You can save another $8,000 by funding the CPF SA/RA of your parents or grandparents. Unless your retirement income exceeds the current Full Retirement Sum ($192,000 in 2022), you will not be exempt from paying taxes on the excess.
Using the CPF top-up “trick,” you can top up your Medisave account up to the Basic Healthcare Sum (currently $66,000). Although your fund will be locked up, similar to CPF SA balance, you can still utilize it for medical bills and health insurance premiums.
You can further decrease your taxable income by depositing funds in an SRS account, which is a pseudo-CPF SA that can only be withdrawn after retirement. Of course, there is still a limitation imposed on the amount you contribute. For Singaporeans and PR, it’s capped at $15,300. Just take note that if you don’t invest the money, it will devalue due to inflation so better invest it as soon as possible.
How to claim: Both the CPF and the three local banks running your SRS accounts will notify your activity to IRAS, so you don’t have to disclose your voluntary retirement top-ups. Make sure to double check your documents to see if your contributions have been properly accounted for.
Benefits for Working Mothers with Children, Qualifying Children's Benefits, and a Tax Rebate for Parenthood
Starting a family comes with many hurdles, but the tax reliefs and refunds offered to Singapore tax resident parents make it simpler for them to fulfill their physical necessities. You may be eligible for a number of tax relief programs for married couples and families, so be sure to look into all of the options.
Please visit the IRAS website for further information on tax reliefs for parents, as there are far too many to include here. Tax deductions are often granted automatically, but it’s always a good idea to double-check.
Clearly, as you can see, it is advantageous to be a working mother since you receive most of the tax deductions. If you have three children, your taxable income will decrease by 60%. Not only that, if you let your parents babysit for free, they’ll give you an additional $3,000 off.
Not to mention the substantial Parenthood Tax Rebate of $5,000 for the first kid, $10,000 for the second, and $20,000 for the third and subsequent children.
Rather than subtracting from your income, you’ll get a direct rebate on your tax bill! It’s possible that you will never have to pay a penny in income taxes if you keep having children.
How To Claim: If this is your first time, you’ll need to update your information when claiming child-related tax relief. Head on to “Edit My Tax Form,” choose “Deductions, Reliefs and Parenthood Tax Rebate,” and then “Child.”. Update your claim with the necessary information. For those who received child tax credits the previous year, this section will be automatically filled in for you.
Purchasing Life Insurance Policy
Purchasing a life insurance policy has numerous advantages. Aside from ensuring that your family can manage their day-to-day needs if you die unexpectedly, you may be eligible to receive life insurance relief as well.
How to Obtain Life Insurance Relief:
Your compulsory employee CPF contribution or optional self-employed Medisave/voluntary CPF contributions and Medisave contributions must be less than $5,000 to qualify for this reduction.
As for salaried employees (those who make CPF contributions) under the age of 35 are not eligible for this tax relief if they earn $25,000 or more per year.
For more information on how the relief is computed, you can visit the IRAS life insurance relief page.
To take advantage of this form of tax relief, purchase a life insurance policy online. These plans provide coverage for you and your family in the case of death, terminal illness, or total and permanent disability (TPD before the age of 70).
Developing Your Skills: Course Fee Relief
What are your plans for the year 2022? Do you wish to upgrade your skills, career wise? Well here’s some good news for you: you’d be eligible for up to $5,500 in tax savings.
If you completed a course that is relevant to your present job, you’ll be eligible for the Course Fees Relief. You can deduct up to $5,500 from your taxable income by claiming the amount of expenses you’ve paid for your course plus your exam fees.
Have you wanted to change careers in the middle of your current path and consider taking a course that is completely different? If that’s the case, then do what makes you happy. But in the meanwhile, save those receipts so you can claim the tax reduction once you start your new career.
How To Claim:Claims can only be made on your income tax return for those who are qualified. Go to “Edit My Tax Form,” then “Deductions, Reliefs and Parenthood Tax Rebate,” and then “Course Fees.” Enter the amount of your claim and press the “Update” button.
Make $1000 Donation to IPC
You may already know that giving to your favorite IPC (Institution of a Public Character) will lower your income tax bill. The Tatler clique organizes charity galas all the time, isn’t that the reason?
For those who care deeply about animal welfare, environmental protection, or civic duty, the opportunity of receiving a tax deduction from their charitable contributions should not be overlooked.
Donations to IPCs are eligible for a tax deduction of up to a whopping 250%. In other words, if you contribute $10,000, you’ll be able to deduct $25,000 from your taxable income. However, the deduction can only be taken into account in the next fiscal year. You may deduct your taxable income for YA2023, not YA2022, if you make it now.
Other tax deductible donations are:
- SGX-listed shares
- Units in unit trusts
- Artifacts (to National Heritage Board)
- Sculptures or artworks (to National Heritage Board)
- Land
- Buildings
How To Claim:Donations to registered IPCs are immediately sent to IRAS for claims, therefore there is no need to report them. To assist tax deduction, IPCs are now required to obtain donor information (NRIC, FIN, or UEN). Tax-deductible status will be indicated on your receipt if your donation qualifies.
Having a Tax Relief Gives You a Great Relief
Paying taxes makes Singapore a pleasant place to live, but it is not the only way to make it possible. You can save a lot of money on taxes by doing things like boosting your CPF, joining the SRS scheme, making a donation to an approved IPC, or buying a life insurance policy. Just keep in mind that you must complete these tasks by the end of the year in order to qualify for the tax breaks.