After starting to earn money, 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%.
While I’m earning kachang puteh now, being new to the workforce, it doesn’t deter me from trying to reduce my income taxes. You gotta start early to enjoy the benefits earlier!
Before we jump into how to legally reduce our income tax, you can calculate 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 $20,000 in the fiscal year.
|Chargeable Income||Income Tax Rate (%)||Gross Tax Payable ($)|
In excess of $320,000
Chargeable income 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 2017 comes to an end!
Ways to Reduce 2017 Income Tax
For the Family
The government is rewarding filial piety! If you have supported your parents or grandparents in the fiscal year, you can claim either parents/grandparents relief.
Note that these conditions must be met:
- The dependent is 55 years old and above as of 2017
- The dependent do not earn above $4000 for their annual income
** Note that you can claim up to 2 dependents only
|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|
Plan your dependents retirement account now and get rewarded with tax relief! So said by the government.
|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|
You can do a voluntary to your dependents CPF Special / Retirement account for up to a maximum of $7000 in total to enjoy tax relief. Note that if you are topping up for your spouse or siblings, they must not be earning more than $4000 in the fiscal year, if they are able-bodied.
**Tax relief subject to existing amount in SRS 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.
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 excluding the compulsory CPF contribution.
The government values citizen upgrading a lot. Hence, if you have taken up any self-sponsored course in FY2017, they are also applicable for tax relief, up to a cap of $5500.
You can check the available provider with ACRA here.
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 in FY2017, you can claim a tax relief of $2500.
You can check out the approved institutions here.
For the Property Landlords
Rental income is income-taxible, 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
As long are you are a working mother, regardless of whether you are married, divorced or widowed, you are eligible for this relief. 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.
Giving birth and going back to the workforce is strongly encouraged in Singapore such that you income tax relief is tiered 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
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.
|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
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.
|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|
**Note that QCR/HCR + WMCR is capped at $50,000 per child
More reasons to be parents! As long as you are a Singaporean citizen, and not a unmarried parent, and have a child that fit the IRAS approved requirements, you are eligible for the parenthood tax relief. The PTR can be co-shared by both parents, or claimed by either parent.
(For child born in 2004 to 2007)
(For child born from 2008 onwards)
|5th and subsequent child||$0||$20,000 per child|
For the Guys
Finally something for you, and it is related to the 2 years of enduring you guys went through. For those who completed their full-time National Service (NS), they are entitled to tax subsidies based on the following table.
|Did you perform NS activities in the preceding year?||NSmen
|NS Key Command and Staff Appointment Holders|
Bonus: For the wife and parents of a NSmen, they also get to receive tax relief of $750 as long as they are Singaporeans.
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!