After joining the workforce, I came to know the existence of income tax. Singapore uses a method called progressive income tax whereby higher income earners pays a proportionately higher tax, up to a highest rate of 22%.
Income tax can eat into a huge amount of your income if you have other commitment to pay for and many do not take into consideration when they do their financial planning.
You can roughly estimate your potential income tax based on the table below.
**Note that you will only be receiving a letter from IRAS asking for income tax only if you earns more than $20,000 in the year.
| Chargeable Income | Income Tax Rate (%) | Gross Tax Payable ($) |
|---|---|---|
| First $20,000 Next $10,000 | 0 2 | 0 200 |
| First $30,000 Next $10,000 | – 3.50 | 200 350 |
| First $40,000 Next $40,000 | – 7 | 550 2,800 |
| First $80,000 Next $40,000 | – 11.5 | 3,350 4,600 |
| First $120,000 Next $40,000 | – 15 | 7,950 6,000 |
| First $160,000 Next $40,000 | – 18 | 13,950 7,200 |
| First $200,000 Next $40,000 | – 19 | 21,150 7,600 |
| First $240,000 Next $40,000 | – 19.5 | 28,750 7,800 |
| First $280,000 Next $40,000 | – 20 | 36,550 8,000 |
| First $320,000 In excess of $320,000 | – 22 | 44,550 |
The income tallied for tax purposes includes:
- Total salary, inclusive of bonuses
- Employment benefits such as housing or stock options
- Rental income from renting out your property
Now, here’s how to legally reduce your income tax before the year comes to an end!
For the Married
Parents [In-Laws] / Grandparents [In-Laws] Relief
The government is rewarding filial piety! If you have supported your parents or grandparents in the year, you can claim either parents/grandparents relief.
Note that these conditions must be met:
- The dependent is 55 years old and above
- The dependent do not earn above $4000 for their annual income
** Do note that you can claim for up to 2 dependents only
Parent Relief
| YA 2010 to YA 2014 | From YA 2015 | |
|---|---|---|
| Taxpayer Stays with Dependant | $7,000 per dependant | $9,000 per dependant |
| Taxpayer Does Not Stay with Dependant | $4,500 per dependant | $5,500 per dependant |
Handicapped Parent Relief
| YA 2010 to YA 2014 | From YA 2015 | |
|---|---|---|
| Taxpayer Stays with Dependant | $11,000 per dependant | $14,000 per dependant |
| Taxpayer Does Not Stay with Dependant | $8,000 per dependant | $10,000 per dependant |
Top Up your Dependents Retirement Account
Plan for your dependent’s retirement while saving some tax in the process!
You can do a voluntary to your dependent’s CPF Special / Retirement account for up to a maximum of $7000 in total to enjoy tax relief. Do note that the dependent must not be earning more than $4000 annually, if they are able-bodied.
**Tax relief subject to existing amount in SRS account.
| Amount of Cash Top-up to own or family members’ CPF Special/Retirement Account (does not exceed the limit on cash top-up amount for computing tax relief*) | Amount of Relief |
|---|---|
| Below $7,000 | Exact amount of cash top-up |
| $7,000 or more | $7,000 |
For Yourself
Top Up your CPF Special Account
By topping up your CPF special account, you are essentially killing two birds in one stone. These monies will go into building up your retirement funds. Given that the current CPF special account is 4% annually, for the $7000 you put now, it will rolled and compounded to be $22,704 after 30 years.
You can also get a dollar-for-dollar tax relief, up to $7000 for the amount of cash top-up to your special account. If you think about it, the government is actually giving you rebates to save for your retirement. Sounds legit.
Top Up your Medisave Account
By voluntary toping up your Medisave account, you not only get tax relief, you are also preparing for rainy days for your body. The amount of tax-relief is capped at the maximum CPF contribution cap including the compulsory CPF contribution.
Upgrade Yourself
The government values citizen upgrading a lot. Hence, if you have taken up any self-sponsored course in the year, they are also applicable for tax relief, up to a cap of $5500.
You can check the available provider with ACRA here.
Make Donations to Approved Institutions
Do good, and good will come to you
In the spirit of giving, the government is rewarding those who make donations to approved institutions by giving them a tax relief of 250% of amount donated. This means that if you donated $1000, you can claim a tax relief of $2500.
You can check out the approved institutions here.
For the Property Landlords
Claiming Costs Incurred from Renting Properties
Rental income is taxable, and for those landlords with multiple properties, the income generated may be substantial, and may push you up multiple income brackets. While there is no way out of escaping the income tax, you can lower them.
IRAS allows you to claim expenses you incurred from renting the property. This includes:
- Interest you paid for the housing loan to purchase the property
- Property tax
- Fire insurance
- Repairs and maintenance
- Agents commission to secure tenants
- Costs of management fees
- Replacement of furniture
- Utility and broadband bill
Only after deducting these claimable expenses is the net income taxable.
For the Working Mothers
Grandparent Caregiver Relief
All mummies are eligible for this relief regardless of whether you are married, divorced or widowed. You can claim this as long as your parents / grandparents are not working and are taking care of your kids, who must be Singaporean and less than 12 years old.
Note that you can only claim up to $3000 on either one of them, and of which, no other family member have claim grandparent caregiver relief on them.
Working Mother’s Child Relief (WMCR)
Giving birth and going back to the workforce is strongly encouraged in Singapore where huge relief is given based on the number of children you have.
| Child Order | WMCR Amount |
|---|---|
| 1st | 15% of mother’s earned income |
| 2nd | 20% of mother’s earned income |
| 3rd and beyond | 25% of mother’s earned income |
Note that your child need to fulfil the following conditions:
- He / she must be Singaporean
- The child must be below 16 years old, or studying full-time at any education institution
- He / she does not have an annual income exceeding $4000
Foreign Maid Levy (FML) Relief
To encourage married women / divorcees or widowed women with children to stay in the workforce, the government allows them to claim for foreign maid levy relief.
Note that you can claim for only 1 foreign domestic worker for up to 2 times of the levy paid in the previous year.
| Normal | Concessionary# | |
|---|---|---|
| No. of Months Levy Paid in 2016 | 12 | 12 |
| Total Levy Paid in 2016 | $3,180 ($265 X 12 months) | $720 ($60 X 12 months) |
| Maximum FML Relief for YA 2017 | $6,360 (2 x $3,180) | $1,440 (2 x $720) |
For the Parents
Qualifying Child Relief (QCR) / Handicapped Child Relief (HCR)
For the fathers, do not despair. You can claim for QCR or HCR. The relief amount can be claimed by either the mom or the dad, or can be shared between both parties.
**Note that QCR/HCR + WMCR is capped at $50,000 per child
| Year of Assessment (YA) | Qualifying Child Relief (QCR) | Handicapped Child Relief (HCR) |
|---|---|---|
| From YA 2015 | $4,000 per child | $7,500 per child New! |
| From YA 2009 to YA 2014 | $4,000 per child | $5,500 per child |
Parenthood Tax Relief
More reasons to be parents! As long as you are a married Singaporean citizen, and have a child that fit the requirements, you are eligible for PTR relief. This can be co-shared by both parents, or claimed by either parent.
| Child Order | PTR (For child born in 2004 to 2007) | PTR (For child born from 2008 onwards) |
|---|---|---|
| 1st | $0 | $5,000 |
| 2nd | $10,000 | $10,000 |
| 3rd | $20,000 | $20,000 |
| 4th | $20,000 | $20,000 |
| 5th and subsequent child | $0 | $20,000 per child |
For the Guys
NS Relief
For the guys who went through the intense 2 years journey of NS, you are entitled to tax subsidies based on the following table.
Bonus: For the wife and parents of a NSmen, they also get to receive tax relief of $750 as long as they are Singaporeans.
| Did you perform NS activities in the preceding year? | NSmen (General Population) | NS Key Command and Staff Appointment Holders |
|---|---|---|
| No | $1,500 | $3,500 |
| Yes | $3,000 | $5,000 |
Whew, we went through so many ways you can legally reduce your income tax. I’m not surprised that you might not be paying income tax if you have done some of them.
Share with us in the comments on what you have done to reduce your income tax!
