Reduce your tax payments in 2021 with these tips!
2020 was a tough year for many people – some have been retrenched, suffered wage cuts and/or had zero or reduced bonuses. For those who were fortunate to keep their jobs, they may find that their financial situation has worsened, having to support family members, or simply, grappling with the challenges of working from home and struggling to segregate work and home boundaries.
Being aware of your eligibility for tax reliefs and deductions offers an avenue to reduce tax payments and helps you to save money. While most individual tax reliefs remain similar to previous years, you may find some reliefs applicable to you now due to the situation you are in. For instance, you might be able to submit a claim deductions for work-from-home expenses, and new parents would be able to claim reliefs not available to them as an unmarried individual previously.
When claiming tax reliefs, do bear in mind that there is a total personal income tax relief cap of $80,000.
To recap, tax-filing for the Year of Assessment (YA) 2021 begins on 1 Mar 2021. If you need to submit an income tax return, please do so by 15 April for paper filing and 18 April for e-filing.
We highlight some tax deductions and reliefs that may be relevant to you for YA 2021:
General tax deductions
• Deductions on employment expenses
Working from home was the default work arrangement in 2020 for most of us and many of us could have incurred higher “work-from-home expenses”. If you are required by your employer to work from home and the resulting incremental home office expenses (such as electricity and telecommunication charges) are not reimbursed by your employer, you can claim these expenses as a tax deduction.
For most of these expenses, you would only be able to claim the difference in the bill amount compared to before working from home. You can also claim deductions for Wi-Fi monthly subscription fees if the Wi-Fi was set up specifically to enable you to work from home, such as after the Circuit Breaker measures have been introduced. If you are no longer required to work from home and you choose to continue to subscribe to the service, the subscription fees incurred thereafter would not be deductible.
For households with more than one person working from home, IRAS will accept an equal apportionment basis in computing the amount of shared expenses across all working individuals in the same household.
• Deductions on donations
You can claim tax deductions of 2.5 times the amount of donations made in 2020. Do note that only cash donations made to an approved Institution of a Public Character (IPC) or the Singapore Government for causes that benefit the local community are deductible donations.
Individual tax reliefs
• Course Fees Relief
Course Fees Relief is given to encourage individuals to continuously upgrade their skills. For some who might find that they have more time to attend courses last year due to the pandemic, you can claim this relief for certain courses that you have attended.
To qualify for relief, the course attended should lead to a recognised academic and professional qualification. It can include any course, seminar or conference that is relevant to your current profession and business. However, courses for recreational purposes or that teach general skills (Microsoft office, social media skills, internet surfing) will not be eligible.
You can claim the actual course fees incurred by yourself up to a maximum of $5,500 each year regardless of the number of courses, seminars or conferences you have attended.
• Parent Relief
Parent Relief is given to promote filial piety and recognise individuals who are supporting their parents, grandparents, parents-in-law or grandparents-in-law in Singapore.
To claim Parent Relief / Handicapped Parent Relief for YA 2021, you must satisfy all the conditions below:
Handicapped Parent Relief
|The dependant was living in your household in Singapore* in 2020.
If the dependant lived in a separate household in Singapore, you must have incurred $2,000 or more in supporting him/her in 2020.
|The dependant was 55 years of age or above in 2020.||Yes||Not applicable|
|The dependant is physically or mentally disabled.||Not applicable||Yes|
|The dependant did not have an annual income** exceeding $4,000 in 2020.||Yes||Not applicable|
This relief could be useful if your parents’ income were affected due to the pandemic and you had to step up with financial help to support them.
For a full list of general tax reliefs, please refer here.
Tax relief for working mothers
Working mothers can tap on certain tax relief claims, especially if they have hired a domestic helper in the last year or engaged their parents or parents-in-law to help with child-caring duties.
• Working Mother’s Child Relief (WMCR)
To claim WMCR in the Year of Assessment (YA) 2021, you must satisfy these conditions in 2020:
- You are a working mother who is married, divorced or widowed;
- You have taxable earned income from employment or through pensions, from trade or business, or through a profession or vocation.
- You have maintained a child who is a Singapore Citizen as at 31 Dec 2020 and has satisfied all conditions under the Qualifying Child Relief (QCR) / Handicapped Child Relief (HCR).
• Foreign Domestic Worker Levy (FDWL) Relief
Working mothers with school going children may claim relief for foreign domestic worker levy paid in the previous year. Singles and married men are not eligible for this relief. You may claim twice the total foreign domestic worker levy paid in year 2020 on one foreign domestic worker.
• Grandparent Caregiver Relief (GCR)
Grandparent Caregiver Relief (GCR) is a tax relief given to working mothers who engage the help of their parents, grandparents, parents-in-law or grandparents-in-laws to take care of their children. The amount claimable is $3,000.
For you to claim this relief, the caregiver must have been:
- living in Singapore in 2020,
- looking after any of your children who is a Singapore citizen aged 12 and below in 2020; or unmarried handicapped children who is a Singapore citizen in 2020,
- not working in 2020.
Claiming Personal Reliefs Incorrectly May Lead to Penalties
IRAS reminds taxpayers to claim personal reliefs only if they meet the qualifying conditions for the reliefs.
If you are e-Filing, personal reliefs that you claimed and were granted last year would usually be automatically included in your tax return. Please check and remove the relief claims if you are no longer eligible for them. Penalties may be imposed for any incorrect claim of relief.
Tips on Claiming Personal Reliefs
- Avoid wrongful claims of personal reliefs. Check if you meet the qualifying conditions for each relief by visiting go.gov.sg/taxreliefs.
- To facilitate your checking, use the Personal Relief Checker on the IRAS website
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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.