Are you guilty of the ‘May Scramble’? Too many Malaysians wait until filing season to address their taxes, only to realise too late that they’ve missed out on valuable reliefs. But smart financial planning requires foresight. Since tax reliefs are tied to expenses incurred within the current calendar year, the window to optimise your tax bill is closing now, even though the deadline isn’t until next year.
With the 2025 Budget (Madani Economy) introducing significant shifts to the tax framework, staying updated is more critical than ever. In this guide, we break down the essential tax reliefs for Year of Assessment (YA) 2025 (filing in 2026) to help you stop overpaying and start saving.
1. New housing loan interest relief (first-time homeowners)
For the first time in recent history, the government is introducing a direct tax relief on housing loan interest. This is a massive win for young Malaysians entering the property market, effectively subsidising the cost of borrowing.
The benefits:
- RM7,000 relief per year for residential homes valued up to RM500,000.
- RM5,000 relief per year for residential homes valued between RM500,001 and RM750,000.
Eligibility conditions:
- You must be a first-time homebuyer.
- The Sale and Purchase Agreement (SPA) must be executed between January 1, 2025, and December 31, 2027.
- The property must be owner-occupied (not rented out for income).
- The relief can be claimed for three consecutive Years of Assessment, starting from the first year you pay interest.
2. Medical expenses expansion (Limit: RM10,000)
The scope of medical relief has been significantly expanded to recognise the reality of the “sandwich generation” – those caring for both children and elderly relatives. While the total cap remains at RM10,000, the qualifying categories now offer much more flexibility.
New inclusions for YA 2025:
- Grandparents are now covered: Previously, you could only claim medical expenses for parents. Now, medical treatment expenses incurred for your grandparents are also eligible under this RM10,000 limit.
- Vaccinations for parents: The sub-limit for “full medical check-ups” (RM1,000) now allows you to claim vaccination costs for your parents.
- Self-test kits: In a post-pandemic world, the government has formalized the inclusion of self-test kits (e.g., COVID-19, Influenza) under the medical check-up sub-limit.
The sub-limits (Part of the RM10,000 Total):
- RM1,000: Full medical check-up, mental health consultation, and vaccinations (Self, Spouse, Child, and now Parents).
- RM1,000: Dental examination and treatment (Self, Spouse, Child).
- RM4,000: Expenses for assessment, diagnosis, and rehabilitation of children with learning disabilities (e.g., Autism, ADHD, Down Syndrome). Note: This specific limit for diagnosis/rehab has been increased for YA 2025.
3. Insurance premiums
For years, the relief for education and medical insurance was capped at RM3,000, a figure that has struggled to keep pace with medical inflation.
- The change: The limit has been increased to RM4,000 for YA 2025.
- What it covers: Premiums paid for education or medical insurance for yourself, your spouse, or your child.
- Strategy: If you previously maximised the RM3,000 limit, you now have an additional RM1,000 “tax-free” allowance. This is a good time to review your coverage and perhaps adding a rider or increase your policy limits.
4. Sports relief: (Limit: RM1,000)
The dedicated sports relief introduced in previous years has been a hit. For 2025, it evolves from an individual benefit to a family wellness incentive.
- New scope: You can now claim expenses for sports equipment and activities purchased for your parents.
- Eligible expenses:
- Purchase of sports equipment (rackets, balls, home gym gear).
- Rental of sports facilities (badminton courts, futsal pitches).
- Gym memberships.
- Registration fees for sports competitions.
This effectively allows you to pay for your parents’ gym membership or purchase a treadmill for them and claim the deduction under your own name.
5. Support for Persons with Disabilities (OKU)
Recognising the higher cost of living for the disabled community, the government has increased the fixed relief amounts across the board:
- Disabled individual: Increased to RM7,000 (previously RM6,000).
- Disabled spouse: Increased to RM6,000 (previously RM5,000).
- Unmarried disabled child: Increased to RM8,000 (previously RM6,000).
These are automatic fixed deductions for individuals registered with the Department of Social Welfare (JKM).
6. The “green” lifestyle: EV & composting
The government continues to incentivise green choices, extending the electric vehicle (EV) charging relief to YA 2027.
- EV charging (Limit: RM2,500): Covers installation, purchase, rental, or subscription fees for EV charging facilities.
- New addition (Composting): A new relief has been introduced for the purchase of household food waste composting machines. While a niche category, this highlights the growing trend toward sustainable living.
7. Standard reliefs
Don’t forget the bread-and-butter reliefs that form the foundation of most tax filings:
- Lifestyle relief (RM2,500): Covers books, personal tech (phones/tablets), internet subscriptions, and self-improvement courses (language, photography, coding, etc.).
- EPF & retirement:
- RM4,000: Mandatory EPF contributions (or voluntary for self-employed).
- RM3,000: Life insurance premiums or additional voluntary EPF.
- PRS (Private Retirement Scheme): Up to RM3,000 relief extended until YA 2030.
- SSPN (Education Savings): Up to RM8,000 relief for net deposits into your child’s SSPN account. This remains one of the most efficient tax tools for parents.
8. The new 2% dividend tax
While not a “relief,” this is a critical update for investors in 2025. Effective YA 2025, the government has introduced a 2% tax on dividend income exceeding RM100,000 per year.
- Who is affected? Individuals receiving more than RM100,000 in dividends annually.
- The mechanism: The first RM100,000 is tax-free. Any amount exceeding this threshold is taxed at a rate of 2%.
- Exemptions: Dividends from foreign sources, and dividends from companies with pioneer status or shipping tax exemptions.
If you are a business owner or a high-net-worth investor, this requires a review of your dividend distribution strategy.
The fifth perspective
Tax planning is the unsung hero of personal finance. While filing is a civic duty, paying more than necessary is a financial oversight. As we close out 2025, you have a brief opportunity to take advantage of the government’s new incentives, particularly for first-time homeownership and family care.
Remember, a tax relief missed is effectively money lost. Make your moves before the year ends, document every transaction, and lock in your savings. A proactive approach now ensures a smooth filing experience in 2026, while keeping more capital in your pocket, where it belongs.
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