How To Save More On Your Income Taxes in Singapore

As we make progress in our career, it’s natural that our annual income increases. Whether it’s through bonus payouts or monthly salary increases, it’s likely to result in a higher income tax as you make your way through the various brackets. Fortunately, you can reduce your taxable income effectively by understanding the different tax relief schemes available in Singapore.

But first, let’s find out more about the current income tax rate in Singapore.

Related: 5 Best Ways to Reduce Income Tax in Singapore

What’s the Current Income Tax Rate in Singapore?

Singapore implements a progressive personal income tax rate for both tax residents and non-residents. For tax residents, this currently ranges from 0-24%. Calculating the income tax for non-residents is straightforward as well, being either a flat rate of 15% or the progressive rate for tax residents, whichever is higher.

In terms of actually calculating the taxes you pay, rates are typically split. A base income amount is charged a fixed amount, and any income beyond this base amount is subject to a specific rate. A chart showing the breakdown of tax rates is shown below.

As you can see, your tax liability increases significantly as your chargeable income increases. Remember the flat rate mentioned earlier? If you earn up to S$20,000 annually, you’re not subject to any income tax whatsoever. However, at the other end of the spectrum, your income tax is a whopping S$199,150 if you earn S$1 million a year.

In between, which is where most working professionals would lie, it’s a combination of a flat charge and fee subject to the percentage rate. For example:

• You earn S$100,000 a year and you’re not eligible for any income tax reliefs. Your first S$80,000 thus corresponds to a flat charge of S$3,350.
• The remaining S$20,000 is then subject to the 11.5% rate as shown in the table above. Therefore, your final income tax is S$5,650 (S$3,350 + S$2,300).

Fortunately, there are a plethora of methods to legally lower the income tax you need to pay, even as your salary rises through the years. We’ll outline several types of income tax relief, and how you can take advantage of them below.

Optimise Your Income Taxes Through These Three Methods

1. Translate Your CPF Top-Ups Into Income Tax Reliefs

From 1 January to 31 December 2024, Singaporeans and Permanent Residents are required by law to contribute 20% of the first S$6,800 of their monthly income into their Central Provident Fund (CPF) accounts. This is automatically split between the various CPF accounts (Ordinary, Special, MediSave, etc.).

These funds can then be used to pay for housing, medical, and retirement needs when the time comes. Putting aside money on a compulsory basis can sometimes feel like a burden, but you may actually be able to save significantly on your taxes by depositing just a bit more cash into your CPF account on an ad-hoc basis. Here’s how:

Under IRAS’ CPF Cash Top-Up Relief programme, Singaporeans and Permanent Residents can decrease their payable income tax by an amount equal to the cash top-up made to their own or their family members’ Special, Retirement, or MediSave Accounts.

This Relief is capped at S$16,000 per individual, which can be achieved with an identical amount in cash top-ups: S$8,000 for yourself and S$8,000 for your family members.

Fortunately, there’s no need to make any claims for this income tax relief. It’s granted automatically to those who are eligible, making this one of the easiest ways to decrease your income tax.

2. Access Income Tax Breaks for Your Home and Family Life

Most folks in Singapore end up spending a great deal on their household, whether it’s everyday essentials to more significant costs such as education fees for their children or financial support for elderly parents. There are several ways you can earn income tax deductions for such expenses:

Qualifying Child Relief, Handicapped Child Relief, and Working Mother’s Child Relief

According to recent research, raising a child up to the age of 21 years old in Singapore costs an average of S$435,707–excluding healthcare, new housing, and additional insurance costs.

To support families who must take on these expenses, the government has devised three forms of tax relief: the Qualifying Child Relief (QCR), Handicapped Child Relief (HCR), and Working Mother’s Child Relief (WMCR).

The QCR reduces your income tax by S$4,000 per eligible child. They must be below 16 years old/studying full-time at any time in the year and legally adopted/a step-child/born to you and your current or ex-spouse. Additionally, they must not have an annual income exceeding S$4,000 (S$8,000 from 2025 onwards).

The HCR works similarly, reducing your income tax by S$7,500 per eligible child. They must be legally adopted/a step-child/born to you and your current or ex-spouse, and medically certified to be mentally or physically handicapped.

Lastly, the WMCR reduces your income tax by 15% if you’re claiming it for your first child, 20% for your second child, and 25% of your third child. If you have additional children, you can make a claim for up to 100% of your taxable income. And as the name suggests, only mothers who have a taxable income are eligible for this relief.

Parent & Handicapped Parent Relief

Another potential way to reduce your income tax is to live with your retired parents and lend support to them. This allows you to be eligible for the Parent or Handicapped Parent Relief. Although you can claim this if you support your parents without living with them, the income tax reduction is significantly lower.

Currently, most Singaporeans move out of their family house after marriage, leaving their ageing parents to live alone. The IRAS created this tax relief to both promote filial piety and provide added support for those who do decide to take care of their parents.

Singaporeans who live with their father and mother can enjoy a total parent relief of S$9,000 per parent, which amounts to S$18,000 total for the family. If you have siblings, the full relief can be shared equally. This means that if you have a brother or sister, each of you can enjoy an equal parent relief of S$9,000.

If your parents are certified to be handicapped, the Handicapped Parent Relief boosts this to S$14,000 per parent. Therefore, it’s a total of S$28,000 for the family.

However, do note that one qualifying criteria is that your parents cannot draw an annual income of more than S$4,000 annually. Therefore, this relief won’t apply to most working professionals whose parents are still working.

Foreign Domestic Worker Levy (FDWL) Relief

Finally, having two working parents is fairly common in Singapore. The dual income helps support the increased expenses from setting up a home and raising children.

While having a higher total income is certainly helpful, working parents usually have little time left for household chores. Think cooking, cleaning, and general home maintenance. As such, hiring a foreign domestic worker can reduce the burden of keeping the home spick and span. They also help ensure your children are eating well and sticking to their daily schedule.

The FDWL Relief is only available for married women, divorcees, and widows with children who are eligible for child relief. And as the name suggests, it also only applies to foreign domestic workers (rather than Singaporean maids). The amount claimable is twice the levy paid in the previous year on one foreign domestic worker.

Beyond this, you may also be able to save money on hiring your domestic worker by purchasing high-value maid insurance or seeking out government grants for workers who provide disability or elderly assistance to members of the household.

Related: A Guide To Finding the Best Maid Insurance Plan

3. Turn Your Rental Expenses Into Income Tax Deductions

If you own a property and are currently renting it out, the payments you receive are unfortunately subject to income tax as well. However, expenses incurred relating to your rental property loans, insurance, repairs, maintenance, and more–can be used to offset such tax when claimed as deductions.

The table below, with details from IRAS, shows several common rental expenses and which are eligible for income tax deductions:

With the growing popularity of rental income, IRAS has simplified tax filings and reduced the burden of record-keeping.

From the Year of Assessment 2016 onwards, property owners who lease their residential units can enjoy the convenience of pre-filled rental expenses, which are calculated based on 15% of the gross rent collected.

Property owners can also claim interest on their mortgage loan, as long as they keep records for verification for at least five years.

Related: Five Ways to Earn Passive Income in Singapore

Optimise Your Personal Income Tax for Maximum Deductions

Finally, you can also reduce your tax payable by reviewing IRAS’s page describing all deductions available for individuals.

You may find several other forms of relief–from course fee relief to deductions for charitable donations–that better fit your needs and lifestyle. Ultimately, you can receive up to S$80,000 in income tax relief per year, which can go quite a long way in offsetting the financial burden per tax season.

Which are the best credit cards you can use to pay your income tax? Check out our roundup of the best air miles credit cards and rewards credit cards to find the best option for you!

Read More:

• CPF Contributions in 2024 – Everything You Need to Know
• Guide To The Working Mother’s Child Relief (WMCR) For Mothers In The Workforce
• Retiring With S$6,000 Monthly: How Much Do I Need to Earn Now?
• Salary Increments and Pay Raises in Singapore – How Much to Expect in 2024 and the Near Future
• How to Put Your Salary Increment to Good Use

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