It’s that time of the year again!
No, not the time of the year where you are looking forward to Christmas dinner with your friends or celebrating the holidays with your family.
It’s that dreaded time of the year where all of you working adults need to about how much income tax you need to pay because tax assessment is from 1 January 2021 to 31 December 2021…
As typical Singaporeans, we love to siam (Hokkien: avoid) things, especially things like taxes. Just look at how many of us try to avoid paying Electronic Road Pricing (ERP).
Of course, there are no avoiding income taxes, but the fact that you’re reading this article shows that you want to avoid it as much as possible.
As the year draws to a close, so does the assessment period for your income tax in the Year of Assessment (YA) 2022.
Since your income tax in YA 2022 is calculated by your income, expenses, as well as your tax deductions from 1 January 2021 to 31 December 2021, you still have a chance to reduce your income tax.
And that’s where we’re here to help!
Here are the top five ways you can use to reduce your income taxes as much as possible, just make sure you do them before the assessment period is over at the end of this year. 😉
TL;DR: Top 5 Methods for Reducing Income Tax
Tip 1: Top up your Supplementary Retirement Scheme (SRS) Account
Planning for your retirement?
If you are not, then it’s time you should be. Open up an SRS account and start saving for your retirement now!
Fun fact, you can contribute up to $15,300 to your SRS account yearly and the best part, the amount contributed can be deducted from your taxable income.
Saving for retirement and reducing taxes, I see it as a win-win for us.
Here’s another tip: Did you know that the retirement age in Singapore is 62, and it will be raised to 63 by the year 2022?
Find out how you can lock in your retirement age at 62 with as little as $1 now!
Tip 2: Top up your Central Provident Fund (CPF) Special Account
On the topic of planning for retirement, the government has initiatives such as CPF in place to ensure that we have money to spend when we’re old.
As a matter of fact, you can receive up to $7,000 of tax relief depending on the amount of money you top up into your CPF special account!
Remember the old adage, “sharing is caring”?
Show your family members you care when you top up money into their CPF special accounts, and they can also receive up to a maximum of $7,000 in tax relief.
However, you must remember that the money you top up into your CPF can only be withdrawn when you’re 65 years old, so don’t get too carried away trying to reduce your income tax.
Always ensure you have some cash in case of emergencies!
Furthermore, you can expect some changes to the CPF rules in 2022, such as the tax relief cap being increased to $16,000 from the previous $14,000.
Tip 3: Claim Your WFH expenses
COVID-19 has us adjusting to multiple changes, one of which is a majority of us being put on a Work-From-Home (WFH) basis.
Even as I am typing out this article, I am sitting comfortably at home instead of being in the office.
Unfortunately, this comfort doesn’t come by for free. I got a huge shock when I received my electricity bills last month, and I couldn’t believe how much higher they had gotten compared to when I was still studying.
But what if I told you, you do not need to worry about the increased bills?
The increase in expenses, such as electricity bills, telecommunication bills, and wifi bills, are all eligible for a tax deduction.
No need to worry about the increased expenses from WFH or costs you cannot claim from the office!
However, do take note that these expenses do not account for personal usage, installation costs, or the costs of purchasing furniture, computer, etc.
Tip 4: Donations
Time to do something nice for the people in need!
I don’t know about you, but it feels good to be giving back to the community. It’s a good reminder that we are doing well, and we have the ability to give back.
Just like Uncle Ben always said, “With great power comes great responsibility.”
But you know what feels even better? Knowing that as an additional incentive to donate, for every $1 you donate, $2.5 will be deducted from your taxable income!
One thing to note, however, is that not all organisations are eligible for a tax deduction. Feel free to check out some of the organisations which are eligible here.
Of course, make sure you donate within your means. After all, if you can’t help yourself, how can you help others, so don’t feel pressured to donate if you’re not financially able to.
Tip 5: Parents Relief
Sometimes, staying with parents is such a fantastic thing, don’t you agree?
I get nice, warm meals from my mother, and whenever something breaks in the house, my father and I would help repair it together.
For those of you with children, don’t you feel a sense of relief knowing that your kids are safe at home with your parents taking care of them?
I’m not saying it doesn’t get frustrating with parents breathing down your neck constantly, but there are its benefits.
Did you know that you can claim Parent Relief for your income tax! I bet you didn’t know about that one until now either.
If you’re living in the same household with your parents who are above the age of 55 and have an annual income of less than $4,000, then I have some good news for you!
You will be eligible for a tax reduction of up to $9,000 per dependant staying with you (up to a maximum of two dependants).
I guess that’s one more benefit of staying with your parents, time for a long-term family reunion!
Need More Tips for “Evading” Your Taxes?
Don’t worry, here at Seedly, we do not support anything that goes against Singapore law. (We also want to siam fines, okay?)
But on to the main topic, these are some of the best tips to help you reduce your income taxes!
Still wanna stretch the tax relief out even further? Feel free to hop by Seedly’s community and post your questions there.
Our community members will be glad to share with you their tips and tricks for reducing income tax.
Still on the lookout for a new job or changing careers? Here are some tips for writing an amazing resume for your job search!
Happy holidays, and happy savings!