Make More! 6 Income Tax Hacks You Need To Know
The recently published income tax infographic for the year of assessment 2013 has received astounding attention from taxpayers in Malaysia. One thing is clear, most are not sure how to make full use of the tax reliefs available.
To help you claim more tax reliefs, here are 6 income tax hacks that can help keep your hard earned cash in your own pocket:
1. Use up the tax exemption on books
This tax relief of up to RM1,000 includes books, magazines and even electronic books from Amazon or Applestore. If you are not a reader, consider buying these items as gifts whenever possible. So, remember to save your receipts when you make that trip to the newsstand or bookstore.
2. Maximise your Employees Provident Fund (EPF) yearly deduction with insurance
The tax deduction for EPF is up to RM6,000 and if your yearly EPF deduction does not reach that amount, top it up with insurance premium payments.
3. Claim tax deduction on your computer
With the tax exemption for personal computer purchase up to RM3,000, every tax payer can make this claim once every three years. Now, you can change your computer to the latest version and still save money through tax relief.
4. The higher earning spouse should claim for child relief
Each child entitles one of the parents to claim tax relief of up to RM1,000. If you and your spouse are filing income tax separately, the child relief should be claimed by the spouse with the highest taxable income in order to minimise the tax payable. It should never be divided between husband or wife. This tax relief is applicable regardless of the number of children you have. The more children you have, the more child relief you can claim.
5. Do not forego tax exemption for sports equipment
Even if you’re not into sports make the next gift you buy for your friends or family members a squash racquet (or any other sports related equipment) and maximise the tax relief of RM300 a year. The sports activities eligible for tax exemption include athletics, badminton, body building, canoeing, fencing, golf, recreational activities, sepak takraw, table tennis, water sports, and more. However, gym membership, personal training session costs and sports apparel do not qualify for tax relief since they are not categorised as sports equipment.
6. File your taxes separately if you are married
Many newly married couples are not sure if they should file their taxes separately or jointly. If both spouses are earning an income, it is worthwhile to file the taxes separately. By filing joint taxes, it will push the chargeable income to a higher tax bracket, therefore applying a higher tax rate. However, there are certain benefits of filing joint assessment.
The tax reliefs are given to encourage certain activities among taxpayers. Make sure you follow these 6 hacks to maximise tax savings.
If you are qualified for certain tax reliefs, the amount you can save depends on your effective tax rate. For example, if your tax rate is at 11% for a tax relief of RM1,000, your savings will be RM110. If you don’t claim RM10,000 worth of tax relief, you will burn RM1,100 in tax refunds!
It is important for taxpayers to document their spending and understand the tax information to make the most of the reliefs.