Reduce Personal Income Tax | Ways to Minimize Taxes in Singapore
Budgeting | Lifestyleby Priyadarshini 28 January 2022
While there are still many months until tax season YA2022 (March and April), now is the best time to start calculating how much you’re likely to spend next year in 2023. In this blog, we tell you how to reduce personal income tax in Singapore.
Reduce Personal Income Tax in Singapore:
Retirement planning: Supplementary Retirement Scheme + CPF Top-Ups
The simplest and most well-known strategy to decrease your taxes is to contribute to all of your retirement accounts. You get $1 deducted from your chargeable income for every $1 you put into these accounts. If you want to lower your taxable income for YA2022, it’s too late. Last year, any CPF top-ups should have been completed by December 31, 2021.
If you make a CPF top-up for your Special Account, the amount will be taken from your chargeable income up to $8,000. You can save an extra $8,000 by contributing to your parents’ or grandparents’ CPF SA/RA. This applies only up to the current Full Retirement Sum ($192,000 in 2022) – anything over that does not qualify for tax relief.
Top Up Medisave
Similar to the CPF top-up “trick,” you can top up your Medisave up to the Basic Healthcare Sum (currently $66,000). Your assets, like the CPF SA amount, will be locked up, but you can utilize them for medical expenditures and health insurance premiums.
Supplementary Retirement Scheme (SRS)
You can lower your chargeable income even more by putting money into an SRS account, which is a pseudo-CPF SA that can only be withdrawn after retirement. If you don’t invest the money, it will depreciate owing to inflation.
Move live with your parents or grandparents: Parental Relief
The government’s next priority is to find a solution to the challenge of an ageing population. Isn’t the most obvious solution to evoke filial piety and have the elderly’s own children care for them? Guess what? There’s a tax deduction for it.
Though it is referred to as “Parent Relief,” it also extends to in-laws, grandparents, and grandparents-in-law, as long as they do not earn more than $4,000 a year. However, you can only claim for two dependents, and you and your spouse cannot claim twice on the same person.
Have Children & Reduce Personal Income Tax in Singapore
Working Mother’s Child Relief, Qualifying Child Relief, and Parenthood Tax Credit
Some people regard newborns as bundles of joy, while others regard them as noisy pooping machines. But perhaps it’s preferable to think of them as financial assets: Not only do you get a ridiculous amount of money from the government’s Baby Bonus, but you can also obtain a bevy of tax breaks.
There are far too many programs to go into detail here, so please visit the IRAS page for more information on various tax breaks for parents. These tax deductions are generally granted automatically, but you should double-check your tax statement just in case.
As you can see, being a working mother is the ideal tax strategy because you get the largest tax breaks. If you have three children, your chargeable income will be lowered by 60%! Get an additional $3,000 off just for letting your parents babysit for free!
Wait, there’s more: the extraordinarily generous Parenthood Tax Rebate of $5,000 for the first kid, $10,000 for the second child, and $20,000 for the third/subsequent child.
Course Fee Waiver to Help You Improve Your Skills
Do you intend to upgrade your skills in 2022? Good for you; you’d be eligible for tax breaks of up to $5,500. If you take a course related to your present job, you are eligible for Course Fees Relief. You can deduct the amount you spend on the course and exam fees (up to $5,500) from your taxable income.
If you decided to take a completely different course in order to change careers in the middle of your career, what would you do? Don’t throw away those invoices just yet; you can still claim the tax break when you start your new employment.
Donations Include Cash, Stock, Artifacts, and Artwork
You’ve probably heard that contributing money to your favourite IPC (Institution of a Public Character) will help you save money on your taxes. Isn’t that why the Tatler set is always organizing charity galas?
It’s true: donations to IPCs are tax-deductible at a whopping 250 percent. That is, if you donate $10,000, you will receive a deduction of $250 percent x $10,000 = $25,000 from your taxable income. The deduction, however, is only applicable the following year. If you donate now, you will receive a tax deduction for YA2023, not YA2022.