Income tax deductions in Singapore
Paying our yearly income tax is all part and parcel of “adulting” in Singapore – and you gotta make sure you file it accurately, lest you receive a fine in the mail. While no one looks forward to having a portion of their hard-earned money whisked away, there are some loopholes around this where you can get income tax deductions in Singapore*.
We’re not referring to tax evasion here, of course. These are perfectly legal means of reducing your taxes and getting tax deductions in Singapore:
*Do note that your tax reduction is capped at $80,000 per year of assessment.
Check out some of our other “adulting” guides:
1. Make cash donations to registered charities
Making a donation will warrant you a tax deduction of 2.5 times the donation amount. This will be reflected on your donation receipt, if applicable for tax deduction. Donations have to be carried out in the year preceding the year of assessment. That means if you want your tax for 2023 to be reduced, the donation has to be made in 2022.
It’s a win-win here: Do good by giving to charities, and reap the rewards of lower income tax. Not all charities are part of the scheme though. In order to be eligible for tax deduction, your donation has to be towards the Singapore Government or an approved Institution of Public Character (IPC). You can check if your chosen charity is an IPC by doing a search on the Charity Portal.
These charities span across a wide range of categories, including but not limited to Animal Welfare, the Arts, Religious, Children/Youth, Sports, and the Elderly. Some specific examples include: Save our Street Dogs (SOSD), Children’s Cancer Foundation, and All Saints Home.
Image credit: @kevonograph
You may even wish to choose charities that are lesser-known and don’t receive as much funding or publicity compared to bigger organisations. Since they are all registered, you don’t have to worry about their legitimacy.
Bear in mind that these donations must come with no benefits for yourself. If there are benefits, they must not have resale value. Things like charity runs with goodie bags, or donation drives that reward you with a souvenir are thus not applicable.
Donations via payroll are also part of this. If your employer is under the Auto-Inclusion Scheme and you have not opted out, your monthly contribution that’s deducted from your salary will count towards tax deduction.
2. Donate an artefact, sculpture, or artwork
Image credit: @tangenghui
If you have valuable artefacts collecting dust at home – such as ornate Peranakan furniture and antique bowls from your great-great-great-grandmother’s time – you can consider donating them to a museum.
Similarly, you can also donate artwork to be used for public display by NHB or any of its approved organisations. These can be anything from sculptures to paintings – anything that has artistic value and/or some form of heritage behind it. If you don’t have any art to spare, donations in the form of cash as well as services provided for the setup and maintenance of public artwork will also qualify.
Hold up, you can’t just “get rid” of any old unwanted piece of junk and consider that a donation. Each artefact must be carefully considered, and its value determined beforehand by the National Heritage Board (NHB). The museum you’re donating to also must possess official Approved Museum Status. Drop NHB an email at email@example.com if you’re keen on making such a donation.
3. Donate land or a building
Image credit: Animal Lovers League
Most of us don’t have spare land or buildings in our possession…but if you’re one of those lucky loaded folks who do, you can donate those to an IPC as well if you’re feeling particularly generous.
For instance, if you’re an animal lover, you can let up one of your properties for a pet shelter to house their animals – or even gift them a plot of land so they won’t have to be at the mercy of a landlord, something many animal welfare groups struggle with.
4. Make a voluntary cash top-up for your/your family’s CPF accounts
If you would rather not keep all your savings in the bank and prefer to have some of it “locked” away for safekeeping, consider topping up your CPF Special Account with cash if you’re below 55 years of age (or Retirement Account if you’re above 55). This portion of money earns 4% in yearly interest and can be used for monthly payouts in your retirement, as well as investment products in old age.
Beyond that, you can also be generous towards your family members and help top up the accounts of your parents/parents in-law, grandparents/grandparents in-law, spouse, or siblings. These top-ups will all give you a dollar-for-dollar tax relief.
However, in order to receive tax relief for spousal and sibling top-ups, your chosen recipient must not have an annual income exceeding $4,000. This income ceiling does not apply for spouses or siblings who are handicapped.
The CPF board will automatically provide you the relevant tax deductions based on their records, so there’s no need to settle any claims on your end.
5. Make a voluntary cash top-up to your Medisave account
Likewise, you can make cash top-ups to your Medisave account, where funds will be used to offset medical bills including hospitalisation. Tax deduction only applies to voluntary contributions and not compulsory contributions. That means the mandatory monthly contribution you put in, be it as an employee or self-employed person, will not be assessed for tax relief.
You must also have not met your Basic Healthcare Sum (BHS), otherwise you won’t be eligible for tax deduction.
6. Get a Parenthood Tax Rebate & Qualifying Child Relief
Having a kid is tough work, and with an increasingly high cost of living here, it’s tough on the wallet as well. Luckily, parents can heave a sigh of relief with the Parenthood Tax Rebate (PTR), which entitles you to a lump sum per child which you can use to offset future tax payments. Any unused amount can be carried forward to future years until it runs out.
Technically, this is akin to being “exempted” from taxes for a couple of years, because it’s highly unlikely that your 1 year’s worth of taxes will exceed the rebate amount.
The latest set of PTR rates is as follows:
- 1st child: $5,000
- 2nd child: $10,000
- 3rd and subsequent: $20,000
Note that this rebate is also applicable to those with adopted children, but does not apply to single parents, unless divorced or widowed.
Parents can also get up to $4,000 tax relief per child under Qualifying Child Relief (QCR) which can be split between the couple. Working mums, you’re covered too. The Working Mother’s Child Relief (WMCR) covers a percentage of your income and is capped at $50,000 per child:
- 1st child: 15%
- 2nd child: 20%
- 3rd child: 25%
Please don’t have kids just for the sake of getting the rebate! That sum of money might sound tempting, but the costs of raising a child go far beyond that, not to mention lots of time and energy. Have a child only when you’re ready, not because of baby bonuses.
7. Contribute to your retirement fund under the Supplementary Retirement Scheme
On top of CPF top-ups, you can also contribute any amount to your retirement fund through the Supplementary Retirement Scheme (SRS). And as with all other cash top-ups, this can be as low as $1, although you might want to put in a more substantial amount for significant tax deductions.
This is something older folks would want to take into consideration since retirement is a more pressing issue for them. If you’re still in your 20s or early 30s, it might be better to set aside your cash for more immediate goals first, such as planning for your first home or starting a family.
8. Get Course Fees Relief for work-related courses of study
Great news for busy bees who’ve been upskilling to make yourself more valuable in the workplace – you’re eligible for Course Fees Relief.
There are T&Cs for this, but as long as you’ve gone and paid for a course, seminar, or conference in the preceding year, you’re eligible for up to $5,500 worth of tax relief. The course of study also has to be relevant to your job for you to be eligible for it.
Not to worry if you’ve paid your fees upfront for a 2-3 year course; you can split the payments up over the years to lessen the blow.If this sounds like a sweet deal to you, no harm checking out these in-demand skills that might boost your resume.
How to reduce income tax in Singapore
It’s never too late to start doing things that’ll help reduce your income tax for the next year of assessment. All these means to get tax deductions in Singapore are perfectly legal, as well as meaningful and/or beneficial in some way – whether for yourself, your loved ones, or even a charity of choice that needs assistance in funding.
For more “adulting” tips, check out these articles:
- How to save on your power bills
- How to save money on bills, phone plans, and more
- Ways to earn passive income
Cover image adapted from: TSL, National Gallery
Original article written on 12th March 2020. Last updated by Jessica Fang on 6th April 2023.
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