Time flies and December is just around the corner. With lots of sales coming up, let’s not forget the spirit of getting “discounts” from your income tax.
Yup. I kid you not.
There is a catch though...
It needs to be done before 31 Dec.
If you are able to do that, you are eligible for next year's tax "discounts". Here are 3 ways to help you reduce your tax legally.
1. Voluntary CPF Top Up
Yes, you can reduce your annual taxable income by doing so. The reduction could be as much as $7,000.
Here are the wordings from the CPF website:
You can enjoy tax relief of up to $7,000 per calendar year, for cash top-up made by yourself and/or your employer on your behalf. You can enjoy an additional tax relief of up to $7,000 per calendar year if you make cash top-ups for your parents, parents-in-law, grandparents, grandparents-in-law, spouse and siblings. To qualify for tax relief for cash top-ups for your spouse/sibling(s), he must not have an annual income exceeding $4,000 in the year preceding the year of top-up (e.g. salary or tax-exempt income such as bank interest, dividends, and pension) or is handicapped.
This voluntary top-up is a one-way ticket. The next time you can access this money is when you reach the payout age for CPF Life, which at this juncture 65.
2. Donations To Approved Charitable Organizations
If you donate to the Institutions of a Public Character (IPCs), or in simple English, approved charitable organizations, you are eligible for tax deductions. For every dollar that you donate, you can reduce your annual taxable income accordingly.
One interesting fact: Did you know that other than the conventional cash donations, there are other modes of donations that can give you tax benefits as well?
Here are some forms of donations that can give you similar tax benefits:
Shares donation
Artifact donation
Donation under Public Art Tax Incentive Scheme Land & building donation
You can read more from here.
There is not cap on this category base don what I had researched.
However, kindly note that you are subjected to a maximum of $80,000 tax relief (from all categories) for FY2019.
And if you think that you are already getting a good deal, here's something that will sweeten the deal further.
To continue encouraging Singaporeans to give back to the community, the Minister for Finance has announced in Budget 2018 that the 250% tax deduction for qualifying donations will be extended for another three years till 31 December 2021.
You can refer here for more information.
This means that for $1 you donate, you can reduce your annual taxable income by $2.50.
Indeed, the more you give, the more you "receive".
3. Supplementary Retirement Scheme (SRS)
Here’s the “meat” of the tax savings. It is especially useful for those who are earning $100k or more a year.
Why I say this is the “meat” is that if you put your money into SRS, your annual taxes could reduce close to $1,000 or more, depending on your income level.
The SRS contribution cap limit is $15,300, currently.
If you combine all 3 methods, your potential tax savings would be much higher. And all these 3 methods are legal!
If your annual income is $150,000. your taxes for FY2019 will be $12,250 (assuming no reliefs).
If you do the following:
1. top up $7,000 CPF to your own and another $7,000 to your family member
2. donates $5,000 to an approved charitable organization
3. tops up his/her SRS account by $15,300
Your taxes will drop to $7,255.50.
There is one thing you need to note though. If you top up your SRS, the interest in that account is very low.
The interest in the SRS account is similar to a bank's interest rate. You will need to look for alternative SRS approved products that can generate higher returns.
To find out more about SRS and its benefits, you can refer to this website.
If you are not sure which products can help you generate higher interest or would like to start your SRS account, feel free to contact me.
Sit back, relax and enjoy the discounts...from your income tax!
Useful knowledge! Thanks for sharing, Vincent!