The world is getting more and more expensive. One of the ways to combat rising costs is by optimising tax returns. There are a number of steps that can help minimise tax paid and maximise potential refunds. This is how to optimise tax returns.
Retirement funds
Contributing to a retirement annuity or pension is a great way of saving on taxes. Contributions to a retirement fund are tax-deductible. Up to 27.5% of taxable income and no more than R350,000 is tax-deductible. Not only does this reduce taxes but it ensures that a comfortable retirement is possible. A good retirement plan saves money now, and in the future.
Medical aid
Contributions to medical aid can offer a medical tax credit to the contributor. This credit is a flat amount (R347 in 2023) that may be deducted from the tax liability. Additionally, dependents on the medical aid scheme will add to this amount. An additional fee (R234 in 2023) is added per dependent past the first two dependents.
This credit does not apply to everyone, such as in the case where an employer pays part of the contribution. It is worth looking into if one is on a medical aid scheme.
Donate
Donations to registered Public Benefit Organisations (PBO) are a great way to show generosity without incurring additional taxes. Charitable donations are tax-exempt up to 10% of a person’s annual income.
The charity must be registered as a Public Benefit Organisation with SARS. A List of organisations can be found here.
Tax-free savings
Everyone should have savings in place. Many savings accounts are tax-free meaning that the investor is not liable to pay taxes for the growth of the investment. There are limits to this but up to R36 000 can be contributed to savings funds without incurring additional taxes, within the tax year.
Travel expenses
Travel is expensive, especially with rising fuel costs. Keep a logbook of the distance travelled for work in order to claim those expenses on taxes. Whether self-employed or working for an employer, travel expenses can be tax-exempt if properly logged.
Taxes are an unfortunate, unavoidable occurrence. Optimise taxes to avoid unnecessary payments. Find a professional who can spot hidden and obscure ways to minimise tax liabilities. Contact Remnant to advise on all matters of tax.