Tips on how to pay less tax later this year
Tax season is around the corner, and this means filing out your 2020 tax return. Considering how 2020 has turned out, everyone is trying to save money wherever they possibly can. With this in mind, we’re going to provide you with some tips on how to pay less tax and keep more money in your back pocket.
Do you contribute towards a Retirement Annuity or a company pension fund?
It’s too late to contribute for this year’s tax season, but if you do have an RA (or the company you work for contributes towards a retirement fund on your behalf), then any contributions you make towards these can be deducted from your taxable income at the end of each tax year, meaning that you pay less tax. You’ll be offsetting your annual contributions against income that would ordinarily be taxed.
Don’t forget about Medical Aid tax credits
By contributing towards a registered medical aid each month, you automatically receive a medical tax credit for you (as the main member), and any dependents on your plan (your spouse/partner, child dependent or other dependents). You can deduct these tax credits from your taxable income.
These medical tax credit amounts are a fixed amount and do not fluctuate based on your income or the plan type you’re on.
If your company pays your medical aid contribution, they can knock the tax credits off the PAYE they are deducting from your salary every month.
This is what you can offset against tax this year:
- R310 per month for the main member and the first dependent on your plan
- R209 per month for each dependent after that
Invest in a Tax-Free Savings Plan
Again, it’s too late for this tax year, but you have until February 2021 to invest R36 000 into a Tax-Free Savings (TFS) Plan, tax free. Investing in one of these accounts is a great money-saving option. A TFS plan is the perfect way to grow your money and not have to pay any tax on interest earned, any capital gains you accrue, and on any dividends you declare.
Do you receive a monthly car allowance or drive a company car?
Unfortunately, car allowances and driving a company car are considered fringe benefits which means you get taxed on them:(. The good news (yes there is a silver lining!) is that if you’re happy to keep a detailed logbook of the amount of mileage you do for work, you can claim that money back.
Write off your home office expenses
Has the recent COVID pandemic left you considering working at home permanently?
Maybe you would be more inclined to take the leap if you knew you could write rent off against tax?
Having a dedicated home office could allow you to claim a tax deduction from SARS, if you’re a full-time employee who spends more than half your working hours working from your home office.
To claim a deduction, you will need to have a specific part of your home which you use exclusively as your office, and then calculate the square meterage of your “corner office” as a percentage of the total area of your home.
We hope these few tips help you save a few Rands on your tax, in the challenging year that is 2020.