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If you are a salaried taxpayer you should start thinking about filing your end of year tax documents before filing season starts later this year.
Everyone wants to save money wherever they can and tax, like insurance, is typically a grudge payment. However, you don’t have to break the law to reduce the money you pay in taxes:
Medical aid contributions: These are no longer tax deductions but have switched to a “tax credit” system in recent years. The difference is that a tax deduction benefit increases with higher taxable income, while a tax credit benefits taxpayers with equivalent expenses equally, regardless of their income levels. The current tax credits are R257 per month for the first two beneficiaries and R172 per month for each additional beneficiary. Your medical aid scheme administrator will send you a tax certificate, which will include all the information you need for your tax return. This will include the number of beneficiaries on your medical aid and the contributions made by you and your employer.
Out-of-pocket medical expenses: Keep a record of all the medical bills and even pharmacy costs that you pay for out of your own pocket. Keep a file in an easily accessible place so that you can file these invoices as soon as you pay them.
Travel: If you have a travel allowance, you should keep a logbook of all trips you make for work purposes. For SARS purposes, your logbook should include the date of travel, your destination, and the reason for the trip and the number of kilometers you travelled. Also keep a record of your fuel expenses and any maintenance costs. You can download an electronic logbook from the SARS website or you could keep a logbook in your car. Just don’t forget to fill it in!
Interest on investments: If you have investments, you should receive an interest income certificate. If you are under 65, the first R23 800 you earn in interest is tax-free. To put that in perspective, you could invest R330 000 in an RSA Retail Savings Bond and you would be able to earn 7% a year tax-free. If you are over 65, the tax-free interest you can earn increases to R34 500.
Invest in a retirement annuity: Retirement annuities have great tax benefits. For starters, your contributions, up to a maximum of 15% of your non-pensionable taxable income, are tax-deductible. You also don’t pay any income tax or capital gains tax on the returns you earn from an RA.
Make a donation: You can donate up to 10% of your taxable income to a public benefit organisation and claim your donations as a tax deduction. Make sure the organisation you choose to make a donation to is a legitimate one that complies with the relevant section in the Income Tax Act.
Income protection policy: If you have an income protection policy which pays you a benefit if you are no longer able to work due to a disability, then you can claim your premiums as a tax deduction.
These are just a few simple tax deductions that you could make as a salaried employee. If you are a provisional taxpayer, for example a freelance writer or an entrepreneur, you could also claim the costs of maintenance, rental or bond payments on your work property and communication. Regardless of whether you are a provisional or salaried taxpayer, it is worth investing in a tax practitioner who can advise you on what you need to keep track of and how to maximise your tax return.
