How to reduce your income tax in 2024

A number of months in the past, I was interviewed by Channel News Asia (CNA) for advice on how to reduce one’s income tax bill, which I penned into a blog post here as well. With tax season right here, a lot of you might have requested if there’s a selected one for working mother and father like myself, so this text is for you – might this enable you to cut back your revenue taxes!

There are 18 methods you should utilize to cut back your revenue taxes, aptly summed up within the visible (by IRAS) above. For these of you who’re confused about why sure schemes are named as “aid” vs “rebates”, here’s the definition provided by IRAS:

• Reliefs – scale back the chargeable revenue that you just’ll get charged taxes on i.e. earlier than the invoice.
• Rebates = used to offset your tax legal responsibility after the invoice has been ascertained, so if it wasn’t used absolutely on this yr, it is going to be carried over to your following tax payments till it’s used up.

Earlier than we dive into particulars, right here’s a fast overview of the completely different reliefs/rebates that working mother and father can use to cut back your revenue tax:

• Parenthood Tax Rebate (one-off)
• Qualifying Little one Reduction – $4,000 per little one
• Dad or mum Reduction – for non-working mother and father whom you’re supporting
• Partner Reduction – for a non-working partner whom you’re supporting
• Grandparent Caregiver Reduction – for working moms who interact their mother and father/in-laws to take care of their little one whereas they return to work
• Overseas Home Employee Levy Reduction – for working moms who rent a home helper to take care of the family whereas they return to work
• CPF Money Prime-Up Reduction – for voluntary top-ups made to your / your family members’ CPF
• Course Charge Reduction – for related upgrading programs taken within the yr
• Supplementary Retirement Scheme – for many who voluntarily top-up your SRS account
• Donate to charity – get 250% tax deduction if you donate to IPCs

There are some that may solely be claimed by working moms vs. working fathers, so right here’s one other simple abstract desk:

Parenthood Tax Rebate (PTR)

That is solely one-off, within the yr that your little one is born. In the event you didn’t expend the entitlement, it can carry ahead and you should utilize it to offset your subsequent years tax payments till the rebate has been absolutely used up.

So in case your little one is older than 1 yr outdated, then you may overlook about this rebate…till you might have one other little one, that’s.

Qualifying Little one Reduction (QCR)

That is mechanically given by IRAS in a 50-50 equal break up per dad or mum as soon as the kid is born, the place you can too declare QCR of $4,000 per little one or $7,500 HCR per little one so long as your little one will not be incomes an revenue.

This may be break up between you and your partner, if want be.

Tip: As confirmed by IRAS, it could be a financially smarter resolution to present the QCR to the upper revenue partner.

Dad or mum Reduction

A minimum of 55 years outdated and earns not more than $4,000 in a yr. In the event you’re staying along with your dad or mum, you may declare as much as $9,000 – however that is shared between siblings. The identical dependent can’t be used to concurrently declare for Partner Reduction both.

Partner Reduction

If one partner is staying dwelling and never working, you may declare a most of S$2,000 for Partner Reduction. Nevertheless, take notice that this aid can’t be claimed along with the Dad or mum Reduction. Right here’s an instance:

e.g. Dad needs to say for Partner Reduction as a result of his spouse will not be working, however on the similar time the siblings need to declare the Dad or mum Reduction on the mom as properly, then each reliefs can’t be claimed on the similar time on the identical dependent. On this case, the household might want to focus on who will get to say what!

Financially, the smarter approach could be to say the upper aid i.e. the kids claiming for Dad or mum Reduction on their non-working mom would get $9,000 vs. the dad claiming $2,000 through Partner Reduction.

Grandparent Caregiver Reduction

Solely claimable by married girls, and designed for conditions the place the mom asks the grandparents to assist deal with their younger children in order that they will return to work.

And even when your little one has greater than 1 caregiver (e.g. each your mother and pop are retired and serving to to take care of your children), you may nonetheless solely declare for a most of $3,000 on one associated caregiver underneath GCR.

Previously, you couldn’t declare this if the grandparent was nonetheless doing a little salaried work (e.g. part-time roles) and incomes an revenue. However ranging from YA2024, this might be modified to cowl grandparents whose annual revenue not exceeding $4,000 you may nonetheless declare.

Overseas Home Employee Levy Reduction

That is additionally solely claimable by working moms, for conditions the place they rent a home employee to assist take care of the family whereas they work. Doesn’t matter for those who don’t have a baby.

You’ll be able to declare as much as 2 instances the quantity of levy that you just paid within the earlier yr on 1 home employee.

In the event you’re wealthy sufficient to afford and make use of greater than 1 home helper, please read here for how much relief you can claim.

CPF Money Prime-Up Reduction

Whenever you make voluntary money contributions to your CPF account or that of your family members, you may declare for tax reliefs on these. The utmost CPF Money Prime-up Reduction per 12 months of Evaluation has additionally lately been raised to $16,000 (most $8,000 for self, and most $8,000 for relations) as of final yr.

This implies you may declare for the utmost by doing the next strikes:

• Make a voluntary money high as much as your Particular/Retirement/MediSave Account
• Prime up your family members Particular/Retirement/MediSave Account

Be aware: Family members refer to oldsters, parents-in-law, grandparents, grandparents-in-law, partner and siblings. Nevertheless, you may solely get tax reliefs for top-ups to your partner or siblings’ if they’ve an annual revenue lower than $4,000 within the yr prior (wage, financial institution curiosity, dividends and/or pension) or they’re handicapped.

The tax aid is simply as much as the Full Retirement Sum (FRS), so it’s a good suggestion to examine whether or not you and/or your family members are approaching the FRS in your CPF account(s) earlier than you make the contribution.

Take a look at extra info and eligibility standards here.

Course Charge Reduction

In keeping with lifelong studying, so long as you might have attended a course or convention that may result in a better qualification related to your employment or vocation, then you can too declare as much as a most of $5,500 in course charges reliefs annually.

Be aware: You can’t declare for programs which might be for leisure functions or basic expertise (e.g. baking / social media / primary web site constructing). Neither are you able to declare for programs that had been paid through SkillsFuture credit or your employer. I do know, as a result of I attempted and needed to name in to make clear!

Nevertheless, IRAS has said that this will lapse for YA2026 onwards 🙁
(Supply: IRAS Deputy Director, Particular person Earnings Tax Division, Sau Hing Chin)

Supplementary Retirement Scheme (SRS)

One other simple hack is to open an SRS account with any of the three native banks and contribute money into the account, which is able to mean you can take pleasure in as much as $15,300 of tax reliefs ($35,700 for foreigners).

The one draw back of that is that deposits in your SRS account earn solely 0.05% p.a. curiosity, so that you may need to take into account investing it as a substitute. Read this for some ideas on what you can invest your SRS monies in!

If you’d like an easier, fuss-free methodology of investing your SRS funds that doesn’t want a lot monitoring, check out ETFs instead – here are some of the most popular ones that fellow SRS investors are going for.

NSman Reduction (self, spouse and dad or mum)

All eligible operationally prepared Nationwide Servicemen (NSmen) are entitled to NSman tax aid, together with their spouse and oldsters in recognition of the help given.

In case your husband is an NSman, you can too declare $750 underneath the NSman Spouse Reduction. Consider it because the nation thanking you for supporting your husband in his service to the nation.

And if you’re a dad or mum whose son is an NSman, every dad or mum can declare $750 whatever the variety of kids who’re NSmen. Sure, so meaning though I’ve two boys, I gained’t have the ability to declare 2 x the reliefs on every of them sooner or later.

Nicely, what if you’re a mom the place each your husband and son are NSmen? In that case, you may solely get EITHER the Spouse OR Dad or mum aid of $750 (and never $750 x 2). Not truthful? Yeah, I feel so too 🙁

Donate to charity

Whenever you donate to any charity that’s an accredited Establishment of a Public Character (IPC), you may take pleasure in a 250% tax deduction based mostly in your donation quantity.

That is normally mechanically calculated and utilized in your tax invoice – supplied that your donation went to a registered IPC.

For example, for those who donated $1k to an accredited charity, $2.5k might be deducted out of your whole revenue to be assessed. And if that brings you all the way down to the decrease revenue tax bracket tier, it’ll positively convey you much more pleasure than the gratification you felt from doing a superb deed. Speak about killing two birds with one stone!

Reliefs with essentially the most monetary influence

Probably the most vital tax aid that I get is unquestionably the WMCR, adopted by my strikes in topping up money to my CPF, my dad’s CPF and in addition to my very own SRS account.

The opposite reliefs barely transfer the needle, however assist to inch nearer to the utmost revenue reliefs cap of $80,000. And each time I discover myself on the sting of 1 revenue tax bracket, I’ll resort to Methodology #4 (donate to charity) to attempt to see if I can convey myself down one tier.

In the event you’re in a family the place the husband is the higher-income partner, then it might be price giving the whole QCR, GCR and Dad or mum Reduction to them in order that your whole family revenue taxes payable will grow to be a lot decrease.

What different revenue tax hacks do you employ?

Share for those who discovered this text useful!

With love,
Funds Babe