Credit for Medical? |
by Elicia Smit
TAXPAYERS younger than 65 years face a new tax regime for medical aid contributions whereby their current scheme contribution deductions become a medical scheme fees tax credit – a non-refundable tax credit provided to taxpayers with a monthly deduction from their pay-as-you-earn (PAYE) liability.
Effective March 1, this change provides the same after-tax benefit to all qualifying taxpayers. The tax credit differs from the previous taxable income deduction; will not be refundable and will operate the same as existing rebates. Taxpayers will receive tax credits by contributing to a local or international registered medical scheme or similar fund. An individual tax credit amounts to R230 per month, shifting to R460 with one dependant and another R154 per additional dependant – and the good news is that dependants now include any family members requiring a taxpayer’s care and support.
Qualifying medical expenses, which will now include contributions paid in excess of four times the tax credit, exceeding 7,5 percent of taxable income can still be deducted from taxable income on assessment.
The new system will not affect taxpayers over 65 years meaning they can still deduct all their qualifying medical contributions and expenses as a deduction from taxable income. Taxpayers 65 years and older and people with disabilities will be included in the second phase of this reform which will be implemented in 2014. Employers must update their payroll systems and employees may find changes to their monthly net income as the tax credits impact on the tax the employer withholds.
