Income tax deductions for medical scheme contributions for taxpayers below the age of 65 years have now changed into tax credits. This system of tax credits seeks to bring about greater fairness, so that all taxpayers, no matter what their income, will derive an equal tax benefit for their medical scheme contributions, as the tax credit is a fixed amount.
This according to Graham Anderson, Principal Officer at Profmed, who says differed from the previous system, which meant that the higher the income, the higher the deductions. “As a result, tax relief on your medical scheme contributions is determined by your age, the number of your dependants and whether you or any dependant is a person with a disability,” explains Anderson.
He says a taxpayer may deduct contributions to a medical scheme as well as qualifying claims that were paid but not recovered from a medical scheme. “These claims may be incurred in respect of yourself, your spouse, child or dependant or any other member of your immediate family in respect of whom you are liable for family care and support.”
Furthermore Anderson says tax relief will be granted in respect of medical scheme contributions in the form of a rebate against tax payable (“medical tax credit”), while qualifying medical claims remains claimable as a deduction against income.
“The amount claimed is limited to the extent that it exceeds 7.5% of taxable income before this deduction and any retirement fund lump sum benefit or severance benefit,” says Anderson.
If you are younger than 65 years of age, a tax credit for medical scheme contributions will be granted to you per month as follows:
- R230 for the taxpayer
- R230 for the first dependant
- R154 for each additional dependant
However, Anderson says for taxpayers of 65 years and older, the medical tax credit does not apply as they will continue to qualify for a tax deduction for the full amount of medical scheme contributions and qualifying medical claims with no limits.
“If the taxpayer or their dependents qualify as having a disability then they would need to have a ‘Confirmation of disability’ form (“ITR-DD”) completed by a registered medical practitioner every five years. If the disability is temporary and expected to last less than five years, the ITR-DD must be completed every year in order to qualify for tax rebates on their medical scheme contribution,” concludes Anderson.
These forms are available on the SARS website: www.sars.gov.za.