Tax preparation does not have to be a taxing time! In fact, with 2 months to go before the year end deadline, now is a good time to take advantage of tax saving tips to see if there are any additional tax rebates or deductions you can take advantage of before the 31 December deadline looms. Read on for more tax saving tips!
The earlier tax tips provided features some tax deductions Malaysian tax payers are entitled to. This second installment of tax saving tips will feature additional tax deductions you can utilise.
Save For Your Child’s Education
Savings for your child’s education through the National Savings Scheme (Skim Simpanan Pendidikan Nasional) allows tax deductions of up to RM3,000. Best of all, this deduction can be claimed by both parents who are assessed separately, making it a total deduction of RM6,000 per child for each family!
Get A Medical Checkup
In a bid to ensure Malaysians remain healthy, the tax department offers an RM500 tax deduction for medical checkups. In addition to that, a deduction of RM5,000 is offered for yourself, wife or child for medical expenses relating to a serious medical disease. A separate deduction of RM5,000 deduction is also offered for necessary basic supporting equipment for a disabilities suffered by yourself, wife, child or parents.
Purchase A Computer
Purchasing a computer, printer and bundled software will entitle you to a tax deduction of RM3,000. However, do note that this deduction is allowed only once every 3 years. This deduction was previously offered as a tax rebate but has since been revised from 2007 onwards.
Tax rebates are additional deductions offered by the tax department. While tax deductions only reduce your overall taxable income by the percentage of your tax rate, tax rebates are calcuated AFTER the taxable income and hence further reduce your revised taxable income by the entire dollar amount! Muslims are entitled to a full rebate on their total zakat payments for the year.
Single Tier Dividend System
Investment in dividend yielding shares for taxpayers whose tax bracket exceed 26% will have benefits to gain due to the new single tier system which has been introduced in 2008 for dividends. Under this system, companies will be paying a company tax of 26% on dividends issued and shareholders who receive the dividends will be getting the net amount, less the 26% tax. Unlike previous years, tax payers will only report the net amount in their taxable income instead of claiming back the difference from the tax department.
Tax payers with a bracket higher than 26% will stand to benefit from the difference between their personal tax rate and the company rate of 26%. Unfortunately, this will only benefit a small percentage of tax payers as most, especially retirees who depend on the dividend income, will be losing from this single tier system.
Consider Investment in REITs
Dividends issued by REITs (Real Estate Investment Trusts) are taxed at a lower 15% compared to the corporate tax rate of 26%. Hence, tax payers whose personal tax rate is 15% and above will benefit from some tax savings from the difference between their personal rate and the 15% tax paid by the REIT companies.
With these tax saving tips, take some time to consolidate your tax returns and work out some tax estimates for your Year of Assessment 2008. Then determine if is any way you can maximise your deductions or rebates to help you towards reducing your taxable income and personal tax rate.
This way, doing your taxes in April 2009 will be a breeze!