Smarten Up and Dodge the Tax Hammer With These Tax Relief Options
Of all the infamous sayings in the world, there’s none more unpleasantly true than this one – “Nothing can be said to be certain in this world, except death and taxes”. Although Singapore has one of the lowest personal income tax rates in comparison with the rest of the world, its citizens still have a super high cost of living to contend with.
Firstly, it is imperative to get over the fear of tax season and acknowledge that impeccable methodology always triumphs over madness, so do not get intimidated by the complexity of the tax filing process. That’s why you must proactively organize your financial statements and details throughout the year to make proper utilization of tax relief schemes.
Taxable income = Total income – Expenses – Donations – Personal Reliefs
Hence, it is important to have all the necessary receipts and records to validate all the claims you file in order to pay the right amount of tax rather than remaining befuddled and unwittingly paying more.
Now that you’re armed with all the essential financial data to file your returns, let us take you a little deeper into the realm of tax relief schemes. A realm overlooked by most people, but actively visited by financially savvy experts and accountants for getting an extra edge on the tax returns they file.
Here are 4 efficient tax relief options you can exercise that can help you preserve a significant portion of your earnings by legally outsmarting the tax man and staying wealthy:
1. Parent Relief – This is one of the most commonly overlooked relief opportunity that Singaporeans fail to spot. In case you stay with your parents, grandparents, parents-in-law or grandparents-in-law, then you can avail a tax break of $7,000 and $11,000 if they are handicapped.
However, you can only file this claim for up to 2 dependents that must be at least 55 years of age and not have an annual income exceeding $4,000.
2. Course Fees Relief – Working professionals or students who are interested in extending their educational credentials to help further their career by taking up various courses can alleviate their taxable income by filing a claim of up to $5,500 in course fees per year.
3. SRS/CPF Top-Up Schemes – This includes a combination of tax relief avenues you can utilize to lower your chargeable income, earn interest and avoid the tax hammer. If you have opened an SRS account at your local bank, you can start by contributing to the Supplementary Retirement Scheme and enjoy a tax break of up to $12,750.
Secondly, you can also use the CPF Minimum Sum Topping-Up Scheme to earn a tax relief of $7,000 for topping up your own account, and another $7,000 if you do it for an immediate family member. If your Special Account has more than $40,000, then you can even use any top-ups you have made to it for investment purposes.
4. Foreign Maid Levy Relief – In order to qualify for this tax rebate, you must be married, or separated and living with kids on whom you could claim child relief. Secondly, the Ministry of Manpower must approve your levy concession application too. If you have employed a foreign domestic worker, you could claim twice the total domestic worker levy paid for one domestic worker in the preceding year. The FML Relief is subject to a maximum of $6,360 or $4,080.
5. Donate to Charity – Any charitable donations you make that to an institution with an IPC are liable for tax deductions. If your philanthropic contributions meet the right criteria, you can even avail a deduction that is 2.5 times the value of the amount you donated. It’s one of the noblest and most friendly tax deduction clauses that will save you a significant portion of your personal income tax, but also
6. Business Expenditure Allowances – Thanks to the uber-nifty business capital tax deduction option, Singaporean entrepreneurs can let out a much-needed sigh of relief in unison as any assets they acquire for business purposes can be deducted to lower their taxable personal income.
Acquiring capital for start-ups and running a business is one of the most financially challenging endeavors one can make in his life, which is why it’s important to properly segregate your financial data for tax purposes since the very beginning. Remember, every asset you purchase for your business including office furniture, laptops, printers, etc. can be quantified as a business expense that depreciates in value over time. And that depreciation in value is also considered a tax-deductible expense.