Reducing Tax Chargeable Income
The year is coming to an end soon, and don’t wait until April to look at your income for the year. Taxes are calculated based on Jan to Dec income. Quickly do your calculations on your income, especially since many people are getting great bonuses, which would definitely bump up the annual income. Check how much income is chargeable, and then quickly do something about it to reduce your tax percentage if possible.
Just to sum up what you can do to reduce your taxes.
1. SRS – You have to be quick, because many banks stop accepting applications before the year is over. That means you can’t wait until 31st December to put your money into fixed deposit through SRS, or do other investments. You may need to print out a form from your company to certify you are working, because SRS is meant for those who are employed. You may invest up to about $11000, but remember you can’t take the money out without penalty before current retirement age. Hence, putting just a few thousand dollars would suffice to your favourite cause today.
2. Charity Donations – Charity donations will get you double tax relief, so if you are feeling generous, don’t just stuff the money into those boxes you see along the road. Make a proper donation to the charities or organisations of your choice. Get into the festive mood and do something for others.
3. For single ladies who are preparing to get married, quickly register your marriage if your partner is an NSman. However, I am not sure whether there is still time to do so before the year is over. That’s because you get tax relief simply being the wife of NSmen. Not sure whether it is because you have to help them wash their uniforms while they are doing duty for the country.
4. Get the help of tax-savvy people who knows how to decide whether certain expenses can be counted. This will help to reduce your taxes.
5. Attend courses that are relevant to your work, or to something you plan to switch to within two years. You can make claims for these. If I am not wrong, as long as you pay for the course now, even if you attend it next year, you still can claim it for this year.
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Why do SRS?
The most important 3 reasons:
1) Setting aside a retirement account that supplements the CPF retirement account (as the name suggests). Or call it “2nd CPF”.
2) Setting aside a sum of money for hospitalization/ medical insurance cost in the post-retirement years.
3) Pay less taxes (while investing for above 2 reasons).
I have set up 4 charts for ease of use, organized primarily by income ranges.