Singapore tax deductions and rebates you probably didn’t know you could get
The tax system in Singapore is quite straightforward. Unlike many other countries, you don’t need to pay a trained accountant to identify all the ways to optimise your income. However, this can also be a flaw. Many Singaporeans don’t pay attention to the Singapore tax deductions and rebates available to them.
Here are some commonly missed ones:
1. Parenthood Tax Rebate
The Parenthood Tax Rebate (PTR) is one of the many initiatives used to encourage Singaporeans to have more children. For any child born or adopted on or after 1 January 2008, the rebate is $5,000 for the first child, $10,000 for the second child, and $20,000 for every subsequent child.
The rebate can be shared between you and your spouse, in any way you choose. You can qualify for PTR if you are a Singapore tax resident and married, windowed, or divorced in the year the child is born or adopted.
2. Tax deductions for renting out your property
Have you noticed that few landlords complain about property taxes in Singapore as opposed to other countries? That’s because even though landlords pay higher property tax, they can also make use of many property tax deductions.
The first type of tax deduction you can claim is the interest on your mortgage. For example, say your monthly repayment on your condo is $4,000. Of this, $2,500 is used to repay the principle, and $1,500 is used to repay the interest. You can claim a tax deduction on the interest portion ($1,500).
(If you don’t know how much your principle and interest payments are, you can request a statement from your bank).
The second type of deduction is for maintenance. You can claim for any repairs and maintenance work made, if you have tenants. However, note that this cannot include enhancements. So you can claim for a hole in the wall you had to patch, but not for having a new feature wall installed.
There are two ways to claim for maintenance: you can either work out the exact costs of maintenance for the claim (get all the invoices and receipts ready), or claim a flat 15% of your rental income. In case it needs to be said, you should always work out the exact cost. Always claim the higher of the two: the exact costs or the 15%.
3. Tax deductions for topping up CPF
This is called the CPF cash top-up relief. You can get it for voluntarily topping up your own CPF, or for topping up the CPF of your spouse, siblings, parents, grandparents, and in-laws. The tax deductions will match the amount of your top-up to a maximum of $7,000 for your own CFP, and a maximum of $7,000 for your family members.
(If you’re interested to know, here’s how you can earn up to 6% risk-free from your CPF.)
4. Employment expenses can be tax deductible
Some employment expenses can be tax deductible, if they occur during your work. However, you cannot claim for a capital expense, or for expenses for which your company has already reimbursed you.
In simplified terms, something would be a capital expense if you are keeping it for yourself (it’s more complex than that but this is the general idea). For example, if you buy a bicycle to make deliveries for the online grocer you work for, that’s not claimable. It’s your bike, not the company’s.
You can, however, claim for expenses incurred while entertaining clients, or transport costs. You can also claim for membership fees in professional organisations, networking event fees for professional bodies.
5. Tax deductions for charitable donations
Until December 2018, you can claim a tax deduction of 250% on all charitable donations. So if you donate $500 to a licensed charity, you can claim a tax deduction of $1,250. (In 2015, in conjunction with SG50, the tax deduction was actually increased to 300% for donations made that year.)
To continue building a stronger sense of community, the government has also decided to extend the 250% tax deduction for qualifying donations for another three years. There is a chance (keep your fingers crossed) that it may become a permanent feature in our tax system.
Keep your receipts!
You need to keep meticulous receipts and invoices to benefit from these Singapore tax deductions. Points 1, 3, and 5 are automated, so you should not have to do any additional paperwork for the claim. However, you should keep track nonetheless, as accidents can and do happen.
For your rental property and employment expenses, you do have to keep track of the receipts and invoices. You will usually have to present them in some form – we suggest you make a habit of keeping your receipts and filing them. As an upside, this will also help you keep track of your budget.
The fifth perspective
You need to do more than save and scrape together tax deductions though. Every little bit helps, but scrimping and saving alone isn’t enough. You need a way to make these small savings become relevant and a good way to do that is to build passive income streams with them.
Visit us the next time we re-open Dividend Machines (in Feb 2018), and we’ll show you how to take your savings and turn them into a life-changing investment vehicle.
TQ. Good write.
Question – Deducting property maintenance cost – how to do this, if the property is a Strata Titled? The costs are paid for by MCST fees collected. How to present the unit share costs for a tax deduction?
Your monthly maintenance charges to management corporations form your maintenance cost.
This is listed on the IRAS link we shared in the article:
All capital expenses are not claimable, e.g initial start-up cost. So when claiming for items for expenses, state explicitly in the receipts e.g ‘replace water heater’ instead of ‘instal water heater’ the initial cost of engaging an housing agent, the commission, is not claimable but the subsequent ones are, as the first one is considered capital cost! Instead of ‘purchase sofa set’ state it as replace.
Never produce an entertainment receipt where it states ‘table for one’, entertain yourself? Even when you declare ‘table for two’ you have to divide by two as IRAS assumes one is you doing the entertainment, therefore not claimable. At the end of day, do not over claim as it will question everything and wasting your time.
“There are two ways to claim for maintenance: you can either work out the exact costs of maintenance for the claim (get all the invoices and receipts ready), or claim a flat 15% of your rental income. In case it needs to be said, you should always work out the exact cost. Always claim the higher of the two: the exact costs or the 15%.”
I rented my flat out for many year without claiming any maintenance. Everytime we change tenant i usually do a cleanup and repair whatever we found not in very good condition. Now the kitchen cabinet might need replacement soon. Can this replacement work be calculated to part of the maintenance.
Also if i only intend to claim 15% of the rental income. How to go about doing it. Will they ask me to produce any document or invoice to support the 15% claim?
You can refer to this guide by the IRAS: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/What-is-Taxable-What-is-Not/Rental-Income-and-Expenses/