How to Reduce Your Income Tax Bill in Singapore
Now that the holidays are behind us, most of us are turning our attention to filing our 2017 tax returns. With the April 18 deadline is right around the corner, here are a few tips on how you can reduce your personal income taxes legally.
1) Claim from your day job
You can eligible for tax deduction if you have paid for work expenses that are not reimbursed by your employer. The work expenses include:
- Entertainment expenses incurred in entertaining clients
- Subscriptions paid to professional bodies or society for professional updates, knowledge and networking
- Travel expenses incurred on public transport, such as buses, trains, or taxis
Please note that you need to safe keep all records of the expenses (these records must be supported with invoices, receipts, vouchers, and other documents) incurred for a period of five years.
2) Claim tax reliefs and rebates
As the title suggests, taxpayers can reduce tax through declaration of tax reliefs that you are eligible to deduct. Some examples of tax reliefs and rebates include insurance, courses, angel investing which you enjoy relief if you meet the criteria.
- Earned Income Relief
Individuals who are employed or doing business in Singapore will be given $1,000, $6,000, and $8,000 tax deductions for ages below 55, between 55 and 59 and above 60 respectively.
- Course Fees Relief
Taxpayers who are currently studying to upgrade their skills and improve their employability can claim relief for courses, seminars, or conferences (up to a maximum of $5,500 worth of course fees, enrolment or exam fees each year). Please note that the condition for this category is that one must be currently employed, or previously employed. Individuals can claim
- Top Up Medisave
Singaporean or Permanent Residents, who are employed or self-employed, can claim tax reliefs when they make voluntary contributions to their Medisave accounts. The voluntary contributions for an individual are capped at $37,740 where the amount of tax relief given is the lowest of the following:
- Voluntary cash contribution directed specifically to Medisave Account or
- Annual CPF contribution cap for the year, less Mandatory Contribution (MC) or
- Prevailing Basic Healthcare Sum (BHS), less the balance in Medisave Account before the voluntary cash contribution.
- Top Up CPF Accounts
Tax reliefs are granted to those who make cash top-ups in their Special or Retirement Accounts, or in your family members’ accounts (parents, grandparents, spouse, or sibling).
- Contribute to Supplementary Retirement Scheme (SRS)
When Singaporeans or Permanent Residents are eligible for tax deferment if they make contribution to the SRS (up to a maximum of $15,300 each year). This is because the investment returns are accumulated tax-free, and only 50% of the withdrawals from the SRS are taxable at retirement.
- Handicapped Family Members
Tax deductions are granted to individuals who are supporting their handicapped family members that include spouses, child, parents, grandparents, or siblings with the condition:
- Dependents must be residing in Singapore permanently.
- Taxpayers must have incurred $2,000 or more in supporting their handicapped family members, and, except for siblings, these dependents must be living in the same household.
- Handicapped parents and grandparents must also be 55 years of age and above, and do not have an annual income exceeding $4,000.
- Life Insurance Relief
Tax reliefs are granted to individuals who have insurance with premiums paid on their own or their wife’s life insurance policies. Please note that his or hers total compulsory and voluntary CPF contributions must not exceed $5,000 in a year.
This tax relief excludes
- Life insurance policies purchased by a married woman for her husband
- Life insurance policies purchased by parents for their children
- NSman (Self) Relief
All eligible operationally ready NSmen including their spouse and parents, are eligible to claim for tax relief under this category with the conditions
- NSmen must have completed their National Service, and
- The amount of NSman Self Relief depends on one’s level of appointment as well as NS activities (whether NS activities were performed that work year).
Besides, the Ex-NSmen or NS-liable ex-regular servicemen above the statutory age are granted the base quantum of $1,500 (the relief will automatically grant to them based on their eligibility and records sent to us by MINDEF, SPF, and SCDF).
- Foreign Maid Levy Relief
Women (married, divorced or widowed) with school-going children are eligible to claim relief for foreign domestic worker levy paid. Relief, which is twice the total amount paid by the husband that year (i.e. $6,360). Married or single men are not entitled to this tax relief.
- Parenthood Tax Rebate (PTR)
In order to encourage Singaporeans to have more children, a Singapore tax resident who is married, divorced or widowed in the relevant year, is eligible to claim tax rebates of up to $20,000 per child.
3) Tap on the various Child Reliefs / Make a charitable donation
4) File for Rental Expenses
Though rental income is liable to tax in Singapore, taxpayers with rental income are eligible to claim for tax deductions on expenses (property taxes, fire insurance, repairs, and utility expenses) incurred for producing the rental income, and expenses incurred during the period of tenancy. On top of that, interests on housing loans can be included as a deductible expense. Please note that the amount of deemed deductible expenses allowable is based on 15% of the gross rental income derived from the letting of a residential property.
Last but not least, please do not forget to file your personal income taxes before April 18 and follow the guide as mentioned above to reduce your income tax bill!