It’s time to file your taxes (well, they extended the deadline; there’s still time if you’re being tardy), so if you’re planning to catch up on that over the weekend, here are 15 ways to help maximize your tax savings!
- SSPN Scheme for Children’s Education
Married couples with children would qualify for a deduction of up to RM 6,000 if they have opened an SSPN (Skim Simpanan Pendidikan Nasional) account to save for their children’s education.
- PRS Scheme for Retirees
Malaysians who have opened a Private Retirement Scheme (PRS) account can claim for a deduction of up to RM 3,000.
- File Separate File Returns (for couples)
A separate assessment allow each spouse to claim personal tax relief of RM 9,000 or RM 18,000 in total for both.
In contrast, a joint tax return only allows a relief of RM 9,000 and additional relief of RM 3,000 or RM 12,000 for both.
- Retirement Gratuity Tax Exemption
The Income Tax Act 1967 states that the retirement gratuity would be tax exempted if “the retirement is due to ill-health”, if the retirement takes place on or after reaching 55 (or the retirement age as per the employment contract), and the employment has lasted 10 years with the same employer, or companies within the same group.
- Change to Cash Reimbursement
Change fixed allowances (entertainment, housing, parking, etc) to “reimbursement” based on receipt and you won’t be taxed on the amount received.
- Donate to Charity
A gift of money to a registered charitable organization entitles you to a tax deduction for the amount given, although the amount cannot exceed 7% of your income. (It’ll also give you a good karma boost!)
- Pay Zakat (Muslims only)
If you are a Muslim, paying any amount in zakat, fitrah or other Islamic dues will entitle you to a tax rebate.
- Pay Your Parents’ Medical Bills
You can claim up to RM 5,000 for payments towards your parents’ medical bills, and you get to be a good son/daughter. Everybody wins.
- Get Fit
A tax deduction of RM 300 for each year of assessment for the purchase of sports and exercise equipment for any sports activities is defined under the Sport Development Act 1997. Time to get healthy and fit!
- Read More Books!
Taxpayers can claim a personal tax deduction to RM 1,000 for purchase of books, journals, magazines and other publications. If you don’t like reading but have friends who do, consider giving books as gifts to maximize this tax deduction.
- Upgrade Your Computer
Hesitating to buy a new laptop to replace that piece of junk from 5 years ago? Don’t worry. A deduction of up to RM 3,000 can be claimed once every three years for the purchase of computers, printers and bundled software.
- Buy/Invest Similar Properties
Similar properties (such as residential, commercial, and land) can be grouped together for income tax purposes. If you own two properties in the same category, you can reduce the taxable profit made from one property with the loss, if any, incurred from the other.
- Invest in REITs
Real Estate Investment Trust (REIT) is a trust fund that invests in rental properties. REITs are required to distribute almost 90% of its income as dividends in-order to enjoy tax benefits. Considering going into REITs if your tax bracket is above 10%, as taxpayers in that bracket are not required to declare the amount in their tax return.
- Register a company in your name…
Registering as an Enterprise is sufficient. All your expenses in doing your business such as petrol, toll, repair and maintenance can be charged to the company to reduce the taxable amount. You can also register your car to the company to enjoy Capital allowance.
- …(and) Hire Your Family Members
Hire a spouse or family member with salary of less than RM 2,500 per month where the salary is tax deductible. You would have to contribute to their Employees Provident Fund (EPF), which in turn entitles them to tax relief.
Another option is to make them a partner in your business, allowing you to divide the income made by the business. A partnership has no tax liability, therefore by opting for separate tax assessments, each individual can claim tax relief.
Last, but not least…
This is not a comprehensive list of ways you can save when filing your taxes, but it can certainly help give you can idea of how you can maximize your tax saving. Most importantly… DO file your taxes, and remember to file them on time, as there are penalties for late submissions!