It’s that time of the year when you’ve received your EA form and you’re looking for ways to maximize your tax reliefs. Although it is something we do annually, it can still be a little confusing especially with changes made year-on-year. Hence, here’s a breakdown that will help make this process a little less confusing.
The Basics
When it comes to tax relief, there is an RM9,000 relief for self and dependent which is automatically deducted. Other than that, the most common tax reliefs include:
1. Employee Provident Fund (EPF)
This includes all contributions that have been made in the year 2019 to Kumpulan Wang Simpanan Pekerja (KWSP) that has been reflected in your monthly payslips.
2. SOCSO
Monthly contributions made to the Social Security Organization (SOCSO) which provides a scheme that protects an employee in the event of any injury while at work. This should be reflected in your monthly payslips as well.
3. Life and Medical/Education Insurance
Premiums for both life and medical insurance are claimable, provided the taxpayer is the policy owner. Education insurance is also included here and combined with medical insurance up to a maximum of RM3,000. Life Insurance allows a tax relief of up to RM6,000.
4. Savings
A great way to maximize your tax reliefs is via savings you’ve made over the year, but not just any deposits that you make into a savings account.
Savings for your Retirement
The tax relief is applicable for contributions made to your Private Retired Scheme (PRS) not exceeding RM3,000.
Education Savings
The Skim Simpanan Pendidikan Nasional (SSPN) was introduced by Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) to help parents to save for their child’s education. This one is a sure winner for parents as it allows a tax deduction of RM8,000.
5. Lifestyle
Good habits are great to have, especially when it gives you a tax deduction. All reading materials and sports equipment are claimable while your monthly internet subscription and devices purchased will also fall in this category. Devices include personal computers, smartphones or tablets.
Caring for Your Parents
The Prevention of Elder Abuse and Neglect Initiative (Peace) under the University Malaya Medical Centre (UMMC) has reported that the number of elder abuse is alarmingly high in Malaysia. 1 in 10 cases in urban areas and 1 in 20 among the rural population have been reported across this 5-year project.
As people become busier and the cost of living becomes more expensive, medical expenses can take a toll on families. Hence, full advantage of this portion for tax deduction should be taken to ensure that elderly parents are well looked after.
Ordinary Tax Relief
The ordinary tax relief for parents is RM3,000 which is limited to RM1,500 for each parent. However, this amount can be shared between siblings.
2. Medical Expenses for Parents
This cover a wide range of items qualified to deduction up to a maximum of RM5,000. It includes,
– any special need expenditures (nutritional food and diapers)
– nursing home care
– dental treatment (cosmetic treatments are not included)
– any other expenditure for parents that have been diagnosed with diseases as well as any physical or mental disabilities.
Raising Children
Parents can take a sigh of relief as there are additional tax reliefs allocated for child care and education, though the latter remains the key focus.
Ordinary Child Relief for children below the age of 18
RM2,000 tax relief is allowed for each child.
World Health Organization encourages mothers to breastfeed their babies up until the age of Our Malaysian government further incentivizes this with tax relief of RM1,000 for any breastfeeding equipment.
Childcare fees of kindergartens permit a further RM1,000 tax relief.
Ordinary Child Relief for children above the age of 18 and unmarried
A child who is receiving full-time education in the foundation years warrants an RM2,000 tax relief each.
It gets better with an additional RM8,000 tax relief for children who are currently pursuing their studies in higher-education locally or abroad.
Focus on Disabilities
Additional help is given to an individual or their immediate family members who have disabilities via further tax deductions. This includes:
Self- RM6,000
Spouse- RM6,000
Child- RM6,000
Basic supporting equipment- RM6,000
Maximizing Tax Reliefs
After all of the above, there are still further tax deductions for specific cases.
Alimony payments: RM4,000
Education fees for self (excluding non-vocational education): RM7,000
Approved donations, gifts and contributions: 7% of aggregated income
All in all, there are ample opportunities to reduce your annual income tax. Hence take note of the different tax reliefs that you will be entitled to year-on-year, and you could be saving yourself thousands.
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