Ways to reduce your personal income tax

tiktok Sensations. The wee blinks, they actually gave some pretty nifty tricks on how to spend and save wisely as a single. If you're in a relationship or you're married. There's a special series as well by my colleague Elizabeth Neo. Check out, am I adulting? Right? It sits exclusively in the Money Talk Stable and there are some great real life experiences and examples there. So, you know, you're not alone in your financial journey. We will never leave you alone.

Now, today's episode doesn't discriminate, it affects everyone because we all have to pay our taxes. Now, I know tax season isn't for another few months, but as we collect our year end bonuses, we cash out our gains for the year. It's as good a time as any to calculate how much we should put aside. Ok. It never hurts to be a bit Kia. So here and plan ahead and know how much you can actually save on taxes. Yep. That's right. You can save on taxes.

It's something that I'm only just learning about and I'm getting the help of one man who managed to get thousands of dollars in tax deductions. Talk about the ultimate life tag, right? Let's wait no longer and get him to talk to us. His name is Josh Tan, better known as the astute parent on youtube. He's also a financial advisor. Welcome to Money Talks. Josh, thank you. It's great to be here. It's great to have you. I'm so glad you carved out the time to talk

to us about this. So I saw your video on youtube on how you managed to get tax deductions to the tune of $90,000. No offense. But please tell me this is a Clickbait. Is it really possible? You know, the only thing that's a certainty is death and taxes, right? So we should always start off on the ground because as you earn more, you naturally see a bigger and bigger tax bill. So this whole concept of getting more reliefs, getting more deductions away from your tax view will definitely impact your

wallet at the on the day. So 90,000 of course, comes with certain donations and hopefully everyone listening in is inspired to donate a bit more, but there's actually a relief cap that maybe we will touch on in a quick while. We will indeed. Ok. So on average, how much time do you actually spend every single year? Right. Working out all these taxes, the reliefs that you can claim that you're eligible for. More importantly, how much time do you spend sitting there

connecting all the dots? I think for someone who hasn't looked at taxes too much, usually it's too busy. They are employee is going to do it. Partner is going to do it right. Someone's going to do it for me. Yeah. So that's one of equation. So I don't always look at my tax bill, but end of the year, I think this is a fantastic time to bring it up because everything that you like to clock for your relief, you have to do it by 31st of December. So the IRS knows it's within this

financial year. See, it's very important this timing. So you don't actually sit down on like, ok, maybe not on 31st December, but maybe in November sometime you start sitting down and you look, do you really sit down and like at the table with all your receipts, all your donations made, everything that you're eligible for is ok. I'm eligible for that and that, do you actually sit down and do

that or actually for myself? I work with clients. And what I do is I schedule calls back to them in November and in December, some of them may be traveling December. I'll give a call to them in November, vice versa. So year end is a period last quarter already. So this is time to dig up everything. Have you made contributions? Are there still gaps that you can fill in to get more reliefs? Because any other day, like what I mentioned, you're going to save on money and that is a

definite plus. Yeah, indeed. Ok. So talk to us about the in a very basic way, the concept of tax claims. I mean, there's things like deductions, there's reliefs, there's rebates, help us sort of filter all of that and tell us what tax claims really are. That's a good question. What many have assumed is that the employer will be in charge of filing all these reliefs maybe for someone who is the first year in workforce, they've heard of stories, employers going to file it, but employer is only in

charge of sending in what you've actually earned, right? So on your own, you have to add in other forms of relief that you are actually qualifying for. So on that front, how I usually suggest is there are some things that are automatically given. For example, if you contribute the SRS account, which is supplementary scheme that itself will be automatically sent in by the bank, right? If you contribute the CPF we do top ups. They are eligible. They will automatically be contributed,

submitted by CPF. But there are other parts that you can put in like cost fees. They are eligible course fee. Yeah, there are certain things that they are within it cost fees, parent relief, parent relief. I've heard of. Yes. Ok. Those are things that sometimes if you don't pay attention, you are actually missing out on. I give you an example. Sure. I've actually seen before a recent case on actually grandparent relief. Also

there's also grand grandparent relief. So what I question that person say, why are you claiming this is there because she's actually reached that relief cap ready, right? And maybe let's share it is 80,000 relief cap. Sure. And we'll get to high 90,000. Sure. Yes, please. So for this case, I was asking her, isn't this grandparents relief wasted if it was fault in your case, because some other grandchild would be eligible to claim it, right?

So in that instance, understanding whether you have reached a cap or passing that really to someone else, if you have a sibling or there's earning way more than you, maybe as a family, you're better off passing away that parents lie to them, right? So these are decisions that if you look through and you are willing to cooper with your family, see how you can optimize it as a family. Why there are actually steps that you can

change and optimize. That's really interesting. I didn't think of it that way because you don't realize there's a cap to things which we'll get into a little later in the conversation. So, as you said, right. Rightfully. So you're a salaried employee, your income tax is what typically gets automatically computed for you. As you said, you have to sort of figure out manually what else you are eligible for. So, how do you go about filing these

manual claims and for relief? Just to be a back story. Sure, I studied accounting. Ok. Most of my friends went to audit someone to Texas, look at where you are, you're still talking about money. So I went to the sales, I went to self employed and in self employed, we have to file our net profit. So it's slightly different, right? Whereas if you are salaried automatically, what you've earned is

fully calculated. So for self employed, which includes hawkers, taxi drivers, you name it, the filing of the net profit still needs to be imputed, right manually. So there are expenses that are eligible, right? That is a big topic. Yes. If we go into that space, it is going to take a while, but always look to go with the framework. What is claimable and deduct the way to

file your actual net profit? Then from there, you would see your deductibles coming in to reduce that chargeable income, which is ultimately what you're gonna be paying for in the percentage based on the tax bracket. So when you file for all these claims, salaried or self employed and you're on the IRS website, for example. Right. Are there certain sort of requirements or preconditions prerequisites that you have to meet in order to make these claims? I think it's stipulated over there, what

is eligible and what's not? Right. So as always, not sure. Give them a call, I think they've clarified it pretty well. They've given, given examples on what are certain business expenses that are claimable. So I guess the equation is very wide. Let's look at each example. And if not just as we check with Iras, what is eligible on that note, I just want to bring up here that there is a very good web page. It's actually a pretty cool infographic style web page on Iris. It's triple W dot

Irs dot gov dot SG slash taxes. You'll see a section on individual income tax and there's a whole bunch of different types of rebates really and deductions that you can make. Speaking of which, hey, Josh, I wanted to ask you, would you be able to explain to us the difference between a deduction, a relief and a rebate? A rebate is an amount that nets off from your final bill? Ok. So for example, if your tax bill is $10,000 and you have a kid,

there's actually a kid rebate, a child rebate. So for parents, yes, that is an amount you can use to net off that 10,000 tax bill, right? So government is actually giving us money, money or having Children, correct in certain and between the parents to split, to use that amount and the other thing to note. So this amount there's no expiry, you can claim it over multiple years. So don't rush. So always be aware that

this rebate nets off the final bill. Sure. So the deductible portion is your total income. Yes, we all these deductibles and then that's your chargeable income, right? And that's the, that net income is what gets charged for income tax. Yes. Correct. There's a chargeable income. Ok. So our attempts that relieves and deductibles, they are actually the same side of the coin, right?

Is to reduce this chargeable income. Got it to a lower bracket because if you see the tax bracket, it jumps once you pass 100 180,000, as you earn more, you naturally see your tax bill go. Yeah. Yeah. Oh, my dear. I'm just suddenly remembering my dad's annual salary and the number of years he had been taking care of my late grandfather. I don't think he knew that there was a parent care, sort of tax relief that he could have used to reduce his net chargeable income.

And on that point, parents staying with you and parents, staying away, it's also a different limit. All right. Ok. So that is where you need to impute manually. Right? So parents staying with you, you'll see the amount is higher and if the parents handicap, my own father is handicapped patient. So there's also different here. Ok. So, so it's follow the amounts because that amount have actually increased along the years. And what we mentioned over here you might change next year.

But do is check and the other thing is the parents to get that relief, they must not be earning active income, right? So if they're earning more than 4000 a year, then there's not eligible? Sure. Ok. And is there any documentation we have to provide in order to make sure that we are eligible for this and all the other claims? Actually, no need. I haven't seen Iras requiring a proof yet on that. So there's no need to worry about proving that portion. We just declare it

a very interesting. Yeah, and that's great because I know in the US tax season is a nightmare for my American friends because they have to find receipts from like an entire year's worth of expenditure. I really, that scares me to no end. So I'm glad that we don't have to do that. Ok. So there are just too many, so many tax reliefs available out there. What are some of the key ones that you feel Josh,

that the average Singaporean should pay attention to? I'm a big advocate of SRS supplementary retirement scheme. I like it because it's flexible in terms of every year you have this limit 15,000 tree. Just keep that back of mind. And if you want to up your total tax deductibles contributing to that space is somewhere you can explore. And the good part about it is just in case you need back that money, you can actually take it out,

of course, with penalties. Right. Right. And because you're essentially drawing down from your retirement fund, it's meant for retirement, right? So the penalties to dissuade you from doing so. So in a nutshell, it's a 5% penalty and it adds to your annual income for that year, but it's still accessible versus contributing to CPF. Right. And just I mentioned I'm self employed. So cash, cash is king and allocating it to where it can be flexible

is also a priority. You need something that's liquid. Yes. So that's why I've actually contributed to my S RS at a very early age. Right now. I've actually did a recent sum of it is about 260,000 build up over the years and you can guess it's compounded year on year, over like 10 years. You are the envy of so many right now, I'm sure. But this is all for retirement money. You can't spend it off, but hopefully it to build a secure future

for family. Yeah. Hello everyone. My name is Christina and I'm Adrian and we are the host of a podcast called Work It. If you never heard of it. Well, it's a good time to tap in, in the last 20 episodes. We've discussed topics like how to negotiate for a salary increase or how to get along with younger colleagues who have different values from you, which incidentally is our top performing episode. If what consumes your life and you want some perspective on issues like management stress,

even office romance. This podcast should be on your list. A new episode drops every Monday. Catch us on the CN or wherever you get your podcast. Ok. So I'm going to bring back that course fees. One. Tell me about that one that I actually didn't tap on myself because I actually reached that limit. So, what is the cost fees? Is it a rebate or relief or there is a relief relief? There are certain causes that are quali, oh, so I've seen that in private clients statements, right? And I think

it's not too difficult to claim, right? So you just need to see what kinds of courses are eligible. Ok. Ok. So if you're looking to eke out and you're looking to upgrade at the same time, don't take causes just for relief because you're still spending money. Yes, exactly. I was just going to say it's not a free pass for you to spend more money, right. Ok. What about the kinds of reliefs and claims that Singaporeans are not necessarily aware of good question brings me to a

case which I did recently. So couple, I have two kids. Ok. And what I usually observe is like if both are high income earners usually first kid or maybe daddy takes second kid, maybe mommy takes and over the years, they didn't actually realize that in 2018, there's this relief cap of 80,000 which we have been hinting throughout our episode. Ok. So what happens is mommy actually has hit that relief cap and

that child's relief is actually wasted. Each child is 4000 relief wasted because that whole change in total tax relief. $80 really impacted working moms. Of course, that is the most powerful tax relief. I know it is like 15% for 1st 2nd kid, 20% 3rd kid is 25% also have more kids, then you get more tax relief. So what happened was previously some high income moms with 34 kids who pin next to nothing in those of taxes. So I guess they were the groups that were the most impacted, right?

And what happens is when you get busy, you have kids, you don't see your tax bill. You assume status quo is fine and didn't realize this 4000 can be transferred to hubby. Yeah. So if mommy is wasting that relief because if you got 100,000 of total relief is only going to be 80,000, right? So you should give away your grandparent leave. You should give her your parents, you should give your child waste it. It's there for you to take. Exactly. Wow. So give us a call,

change the name. I think you can do it online also. I'm not too sure. The steps. Right. I'm sure they'll make it easy for you to do it. I realized those parents have neglected optimizing such things. And if you're on a high tax bracket you r 4000 times a percentage, a lot, you know, it, it adds up to a scary number. Ok. And there was this grandparent relief that you talked about also that I found interesting. I did some digging of my own and I found

that there was something called a helpers relief. Talk to us about that one. I think I don't have a helper to start with. Ok. I think that is automatically imputed if I'm not wrong because once you hire a helper, it goes through the system. That's true. Everything is all because it's legalized. Everything is run through the same system, the same way pass gives us access to everything, right? So that comes in, right? Ok. There's also for those interested, there's also a qualifying

child relief or handicapped child relief. So it's pretty inclusive ns men, wife relief. Who knew that having your husband having been an NS man before benefits you as the wife. Right. Absolutely. Yeah. So for this, if I know it's also auto imputed for guys I've seen in my wife's statement also, I don't know, I found this super long ago I've done with my national service, but every year we do see it once. Ok.

So let's get back to that CPF topic. Ok. And I know you did say that you have a preference to top up your sr topping up your CPF. But it doesn't mean that there isn't a tax relief that comes out of it when you do top up your CPF. And I actually know that people don't know about this, that topping up your CPF, you can actually sort of claim it back in a way, right? So we've had a number of guests on money talks, mentioned this. So talk to us about CPF Relief, how

it works and how it works in tax gains. Basically, maybe let's start with CPF Relief because that's different from retirement sum up, correct. So CPF Relief, you have to understand there are two segments. One is if you are employed, which is fed by company, yes, you see there's a cap on the amount that you contribute yourself, right? That cap is 20,400 on the self employed front. That's where you have the full voluntary contribution that you can claim. So don't

confuse the two segments. If for most of us listening in, I guess you're not employed segment. So that is automatically filled up to 20,400. We have a high income that's Right. That brings us to the next topic of some topping up, you know, recently there's this change that allows you to get relief if you contribute to either the special account or the Medisafe account. Right. So either or so, you know, high income friends who are in their forties, usually they have their full amounts in

their special account. They can't top up to that front. But little did they know this change allows them to pump in money to Medisafe and still get tax relief? Oh, wow. Ok, Medisafe is used all that. You know, you have the one that moves. Right. Exactly. So baby born deductions mom goes to hospital. Anytime that falls below, there's a term for basic health care sum. Anytime it falls below, that's your opportunity to top it up to top it up with cash. Of course, make sure that you're ok

with that cash flow. You don't need it because money send in. You're not gonna see for a while. But the idea is if you have spare cash, you like that 4% interest from Medisave and a lot of people do. Yes. Might as well. You pump it in, you get your tax relief, you get your 4% compounding and that money will be there for you when you need it for medical needs. There you go see. It's

a win win situation. Ok. So we've covered CPF we've covered the SRS and we've covered the different types of rebates and reliefs and deductions out there now enters the big shadow of doubt. Are there any limits or caveats including eligibility, which we kind of mentioned a little bit earlier? Any limits of caveats restrictions? Perhaps we should keep in mind when claiming all these tax reliefs, I think the restrictions will be based on each individual relief. Like what

we mentioned parents relief, there's a 4000 income limit. So do check on each individual and read the terms and conditions. But in total, that total relief is $80,000. So you see your CPF contributing to your SRS relief and as men relief, etcetera, I mean, children's relief. And once you hit that 80,000 us, you can't get more deductions how to reduce the tax bill further. So I've actually shared on my channel that I've actually made a pledge to a Bursary in my alma mater. And so

I'm committed to donating an amount. Yes. And as you can see, government actually gives that incentive, which is a 2.5 times why you donated? That's a lot. Correct. Yeah, so 90,000, if you work backwards, that means that donation to me is $4000 4000 times, 2.5 gets you that 10,000. So that is how I actually did my 90,000 total. Ok. So donating it, it's not just for giving back to society and I think I can elaborate a bit more on what it does for an individual.

Please do. Yes. So I've in that process, help to needy students in NTU. Wonderful, met them through Zoom just to hear beyond their story. And hopefully my little bit of help can bring them to a better place. That is fantastic. That's such great story, Josh. And I also realize in that process, you know, a lot of times we buy expensive stuff to make ourselves feel good and sometimes we don't need it. Most times we don't need and maybe they're feeling good

is just very momentarily instant gratification. I realized that you donating, you actually tell yourself this very important message that you have enough. You prove to yourself, of course, you've given it away. It's a mindset and you're not only giving it away, you're making a difference. The ultimate reward is the fact that you make a difference in someone else's life, a positive difference. Yes. So wins on three fronts, you get, you help someone and more importantly, you told yourself that

you're ok financially. If not, you wouldn't have pressed that button, send in that check to make that payment, which you will never see again. So I through this discussion, urge everybody to think a bit deeper on donating. I think that's something that is under mentioned. We can all do a bit more. We always hear about philanthropist donating big amounts, but actually everybody can tap on this. I was just about to

say every little bit counts. Ok. My final question to you, Josh, I guess as a parting shot, why should we take the time just like you do every single year to commit to tax relief claims? What is the biggest benefit of all money aside? I guess the best outcome from looking at tax bills is you bring yourself back to be more aware of your finances. Tax bills are just an output of your income, of your expenditure of where money have gone to or

who you have relieved as entitled belonging to you. So I guess it's still an exercise to see your entire budgets to be in touch with your own financial goals. So tax is just an outcome. But see this exercise to really look at your own financial situation where you stand sometimes, you know, peace of mind is just knowing that after I've done my taxes, this is my budget. How much am I going to allocate to next year's taxes? It's a nice financial health review in a way. Right. Yes.

Rather than seeing a shock that comes along and you are not prepared for it. Plan ahead for next year. You would find that this whole tidying up would help you a lot in your mental space. Yes, that is fantastic advice. Freeing up that mental space is a way to give you a clean clear head start to the following year. Yes, here's to a fantastic 2024 Josh. Thank you. Same to you. Alright listener. You've been just served a silver platter of

tax hack here on money talks. Be sure you bookmark this episode for tax season, but don't wait till the 31st of December, right? As Josh says, try and plan it a little bit ahead. No, remember is a good time. So you know, you can spend your final month of the year free and easy in your celebratory mood. Christmas and New Year and then you have a clean slate for 2024. Thanks so much Josh for taking the time to spell it all out for us. And thank you to you, our listener. Did you enjoy

this episode of Money Talks? We have always got more for you. Just follow us on Apple podcasts or Spotify. Tell us what you think of this episode or even others that you've listened to better yet suggest some topics you'd like us to cover. I will be looking forward to those ideas. The team behind Money Talks is Jacqueline Chan, Joanne Chan Tiffany, Ang, Christina Robert, Sa Wint Jesselyn Tan and I'm Andrea Heng, be the master of your money.