“there are only two things in life that are certain – death and taxes” – unknown
Time of the year to file your taxes! I usually just claim the usually stuff, NSman, SRS, blah blah. Then, I came across this article by Ryan Ong:regarding income tax deductibles that you may not know about. I just regurgitate the article below, in block quotes. Read below to find out more.
Personally, i found point #2 quite intriguing. I didn’t realise that you can claim rental income and stuff such as: Utility expenses that the tenants didn’t reimburse you for, including Internet access., fees paid to the property manager, if there is one (this includes property agents) – **ps: not sure if this include the one/half month commission to the agent?
For those with a second property, depending on how much your property is being rented out for,15% seems quite a hefty deduction, it should at least bring you to the next lower tax bracket? saving you a couple hundreds, perhaps.
For those who have actually done it in the previous years, if you don’t mind sharing with us, if it actually is true?
by Ryan Ong
INCOME tax in Singapore is straightforward. Most of the time, we fill in a form (or the boss does it for us), and pay whatever number the Inland Revenue Authority of Singapore (IRAS) comes up with. If IRAS inserted a clause that signing off also means we agree to hand-scrub their toilets, we’d probably be cursing and scrubbing at tiles right now. My point: we don’t really pay attention. Here are some deductibles we often ignore:
1. Some of the expenses you incur from work can be deductible
If you need to spend money for work reasons – and your company doesn’t compensate you – you may be able to deduct this expenditure from your employment income. These are “allowable expenses”, and you should check with IRAS to see whether yours count.
There are three conditions that make something an allowable expense:
- The expense was incurred while carrying out your official duties (e.g. a secretary paying a courier to deliver something for her boss)
- The expense was not reimbursed by the employer
- The expense was not capital or private in nature (If you treat your colleagues to lunch, that’s not claimable; if you had to treat a client to lunch, it may be.)
Remember that you can also make a claim if you weren’t fully reimbursed. For example: if you spent $800 on catering for an office function but you were reimbursed only $700, you can claim the remaining $100.
For travel expenses, you can make a claim for public transport only. However, you cannot make a claim for travelling expenses between home and work; only for the extra trips your employer requires you to make.
You need to make the claim under “Employment Expenses”, and you need to keep the receipts for five years.
No, that’s not as inconvenient as people seem to think. Just staple or glue your receipts into an exercise book; it takes five seconds. I’m as organised as a last minute hurricane evacuation, but I still have most of my receipts going back seven or eight years this way.
2. You can make claims for rental income
If you have a property that you rent out, your rental income is taxable. But there are costs you can claim for tax deductions. Some of the often overlooked ones include:
- The premiums for fire insurance
- Utility expenses that the tenants didn’t reimburse you for, including Internet access
- Fees paid to the property manager, if there is one (this includes property agents)
- Repair costs that occur while the property is rented
Note that, if you have a friend or relative paid to act as the property manager, you can still make a claim. However, IRAS will decide if you are declaring a fair amount based on the market rate. For example, you can’t claim that you pay your uncle $25,000 a month to manage the other tenants, in order to get a massive tax deduction.
You also need to have the proper paperwork, which shows you engaged the property manager. No verbal agreements, vague emails or scribbles on the back of a 4D ticket.
For repair costs, these cannot cover improvements. So if a tenant puts a hole in a partition wall, and you get an interior designer to re-do it as a $5,000 feature wall with hidden cabinets, it may no longer be claimable.
Alternatively, use a flat 15 per cent
You can now claim a flat 15 per cent of your rental income, plus loan interest, instead of making claims for all the individual costs (wi-fi, repairs, fees for the manager, etc.)
So say your rental income for the year is $50,000, and your loan interest is $8,000. You can claim a tax deduction of $7,500 (15 per cent of the rental income), plus $8,000 for the loan interest. That would give you a total tax deduction of $15,500.
The problem is that sometimes, your costs incurred can go above the 15 per cent. In the above example, if a tenant blows up your kitchen and causes $20,000 worth of damages, you obviously wouldn’t want to use the flat 15 per cent.
You’ll have to do some maths to see if it’s worth using the flat rate.
3. Tax deductions for charity donations have gone up
I bet you thought tax deductions for donations are dollar-for-dollar. You give $50, you get a $50 tax deduction right? It’s actually better than that.
In 2009, tax deductions for charity donations were raised to 250 per cent. It was meant to be temporary, but later the policy was extended to 2015, and then extended again to December 2018.
So for every dollar you donate to charity, you get a $2.50 tax deduction.
For 2015 (the year of SG50 celebrations), tax deductions for charity donations were 300 per cent instead of 250 per cent. This is valid for all donations made between January 1 and December 31 of last year.
You can check the Charity portal to see which charities qualify.