With tax season coming, it is a great time to go through your past year’s income and look at tax relief schemes that will help you save money.
A change in your personal life, such as getting married or having a kid, can make certain deductions relevant in the new year. Or there may be schemes you did not know of before that are actually applicable to you.
Here are some of the tax reliefs that could help reduce your tax burden.
Income Tax Rates in Singapore
According to the Inland Revenue Authority of Singapore (IRAS), you are a tax resident in Singapore if you are a:
- Singapore Citizen or Singapore Permanent Resident who resides in Singapore except for temporary absences; or
- Foreigner who has stayed or worked in Singapore:
- For at least 183 days in the previous calendar year; or
- Continuously for three consecutive years, even if the period of stay in Singapore may be less than 183 days in the first year and/or third year; or
- A foreigner who has worked in Singapore for a continuous period straddling two calendar years and the total period of stay is at least 183 days. This applies to employees who entered Singapore but excludes directors of a company, public entertainers, or professionals.
This is the chargeable income, income tax rate, and amount of tax you will have to pay this year:
Besides your salary, other sources of income such as rental income and royalties are also taxable. The IRAS has compiled a list of what is taxable on its website.
As shown in the table, the income tax rate rises much more once your income is above S$40,000. This is where tax reliefs come in.
Read more: Freelancers and SEPs: Guide to Income Taxes and CPF Contributions in Singapore
Ways To Reduce Income Tax
There are 18 tax reliefs available for a Singapore tax resident. You can check which schemes you qualify for using the IRAS’ personal relief checker. Remember that the income tax relief ceiling is capped at S$80,000, and some of these reliefs are automatically calculated when you file your taxes.
Here are some of the common tax reliefs that you can take advantage of.
Donating to registered tax-deductible charities such as the Community Chest or any approved Institution of a Public Character allows you to receive tax deductions of 2.5 times the qualifying donation amount. Not only can you donate cash, but other forms of donations such as shares, computers, artefacts, land, and buildings are also applicable for tax reliefs. IRAS has a detailed list of applicable donations here.
2. CPF-Related Top-Ups
You can enjoy tax reliefs if you had made a voluntary top-up to your own and/or your family members’ CPF Special Account (SA), contributed voluntarily to your Medisave account (as long as you have yet to reach the Basic Healthcare Sum), and/or your Supplementary Retirement Scheme (SRS) account.
Through these voluntary top-ups, you get to save for your retirement as well as reduce the amount of taxes you pay. IRAS has comprehensive pages regarding tax reliefs from Medisave, SRS account, and CPF SA top-ups to check for eligibility.
3. Family-related Relief
For individuals who are taking care of family members, there are also tax reliefs available to ease the financial burdens. These reliefs are:
a) Spouse Relief/Handicapped Spouse Relief: For taxpayers who support their spouse or handicapped spouse. This relief provides S$2,000 or S$5,500 worth of tax reliefs respectively.
b) Parent Relief/Handicapped Parent Relief: This relief applies to individuals supporting their parents, grandparents, parents-in-law, or grandparents-in-law in Singapore. If the taxpayer stays with their dependant, the Parent Relief is S$9,000, and S$14,000 for handicapped parents If the taxpayer does not stay with the dependant, the relief amount is S$5,500 and S$10,000 respectively.
c) Handicapped Brother/Sister Relief: This is for individuals who support their handicapped siblings and siblings-in-law. They can claim S$5,500 for each handicapped sibling or sibling-in-law.
d) Grandparent Caregiver Relief: This is for working mothers. They can claim this relief if they have parents, grandparents, parents-in-law, or grandparents-in-law (including their ex-spouses’) to take care of their children. The maximum amount of relief is S$3,000.
e) Qualifying Child Relief (QCR)/Handicapped Child Relief (HCR): This is for parents to recognise their efforts in raising their children. The relief is S$4,000 per non-handicapped child, and S$7,500 per handicapped child.
f) Working Mother’s Child Relief (WMCR): The WMCR is given to encourage married women to remain in the workforce after having children, encourage parents to take up Singapore Citizenship for their children, and reward families with children who are Singapore Citizens. Only working mothers who are married, divorced, or widowed can claim this relief.
g) Foreign Domestic Worker Levy (FDWL) Relief: To encourage married women to stay in the workforce, the FDWL relief allows women to claim twice the total FDWL paid in the previous year for one foreign domestic worker.
Instead of a fixed sum of relief, the amount of WMCR that a working mother can claim for each child is based on how many children the mother has.
A mother with one child can claim 15% of her income. A mother with a second, or third or more children can claim 20% or 25% respectively. A mother can claim up to 100% of her income, depending on the number of children.
From 2024 onwards, WMCR will be changed to a fixed sum from being percentage based. Mothers with children born or adopted after 1 January can claim S$8,000 for their first child, S$10,000 for their second child, and S$12,000 for their third and subsequent child. This will be reflected in the 2025 taxes they file.
Families can make multiple claims on the same eligibility. For example, the QCR and WMCR can be claimed on the same child.
4. National Servicemen (NSmen) Relief
All operationally ready NSmen are entitled to NSman tax relief, which recognises their contributions to National Service. This relief is allowed based on national service done in the previous work year. If you did National Service the previous year, you get a relief of S$3000 to S$5000. Otherwise, it will range from S$1,500 to S$3,500.
Spouses and parents of people doing national service are also given tax reliefs to recognise the support they lent. Spouses and each parent can claim S$750 each. A parent can only claim S$750 even if they have or had more than one child doing national service.
5. Life Insurance Relief
If you paid annual insurance premiums on your own life insurance policies, you are eligible for Life Insurance Relief. This relief is applicable if your total CPF contribution is less than S$5,000 in the previous year.
From 2023 onwards, the voluntary cash contribution to your Medisave account will not be considered under the S$5,000 limit.
6. Course Fee Relief
To encourage Singaporeans to upgrade their skills, IRAS allows individuals to claim Course Fees Relief if they attended a course, seminar, or conference in the previous year if it was to gain an approved academic, professional, or vocational qualification. You can claim the actual course fees up to a maximum of S$5,500 each year.
7. Earned Income Relief
Earned Income Relief is for individuals who are gainfully employed or carrying on a trade, business, profession, or vocation. The maximum relief allowed for those below 55 is S$1,000, S$6,000 for 55 to 59, and S$8,000 for 60 and above. For handicapped persons, the maximum relief for those below 55 is S$4,000, S$10,000 for 55 to 59, and S$12,000 for 60 and above.
Depending on your personal circumstances, you could be eligible for several tax reliefs in the new year. And this you will be taxed less! If you still have doubts about filing your taxes, IRAS has an all-you-need-to-know 2023 tax guide to help you out.