The window to file our personal income tax each year is between 1 March and 18 April. While our next income tax filing will only be in 2025, our YA2025 personal income tax will be based on our chargeable income in calendar year 2024.
This means we have until 31 December 2024 to make the most of the tax reliefs and deductibles available to us. Doing this early will not only reduce stress levels when filing our income tax next year, but can potentially save us money on the income tax we end up paying.
So, before we shift our full attention to holiday plans and Christmas and New Year celebrations, there are some critical financial tasks left to do before 31 December 2024!
#1 Estimate Your Annual Chargeable Income In 2024
The first thing we should do is to estimate our income for the year. There’s still a month left to go, and what can make it tricky is the amount of bonuses we may potentially receive at the end of the year
While getting a big bonus is definitely a great problem to have, knowing how much it will be can help us make financial moves that will optimise our personal income tax in YA2025.
#2 Understand Your Existing Tax Deductions And Reliefs
We are taxed on our chargeable income, instead of how much we earn. There are several in-built schemes that naturally lower our chargeable income.
Firstly, our monthly CPF contributions are not taxable. As the income ceiling for CPF contributions is $6,800 this year (and will rise to $7,400 on 1 Jan 2025), up to $1,360 of our monthly salary is not taxable. This is the 20% Employee CPF Contributions component.
There are also other schemes, such as the Earned Income Relief of $1,000 for those below 55, and NSman Relief of $1,500-$5,000 depending on whether we NS activities in the year and our appointment.
For certain groups of employees, there are further tax incentives. Those who work-from-home can claim eligible WFH expenses, while those who have work-related expenses can also claim eligible expenses. We have to keep track of these eligible expenses, and keep receipts.
Parents are also eligible for the Parenthood Tax Rebate (PTR) and $4,000 in Qualifying Child Relief (QCR).
Then, we can understand the moves we can make to reduce our income tax. Some of the most commons ones are making top-ups to our CPF Special Account or MediSave Account. We can enjoy up to $8,000 of tax relief for making these top-ups.
We can also enjoy a further $8,000 in tax relief for topping-up a loved one’s Special Account or MediSave Account.
Each year, Singapore Citizens and PRs can enjoy tax relief on up to $15,300 of Supplement Retirement Scheme (SRS) top-ups.
If we intend to make charitable donations, we can also time in to optimise our personal income tax – whether we should make it before 31 December or in the following year.
Finally, we have a personal income tax relief cap of $80,000. If we have already hit this amount, there are no further steps we can take to reduce our personal income tax.
Read Also: Complete Guide To Personal Income Tax Rates And Income Brackets In Singapore
#3 Calculate How Much You Need To Pay In Income Tax
Next, we can calculate our chargable income – which will determine our personal income tax..
As income tax in Singapore is progressive, the more we earn, the more income tax we end up paying. By understanding the tax brackets, we can lower our chargeable income into a lower income tax bracket.
For example, if our chargeable income is $160,000, we will have to pay $13,950 in income tax. For up to $40,000 in chargeable income, each dollar of chargeable income we can reduce, we save $0.15. The subsequent $40,000 in chargeable income that we reduce will save us $0.115 per dollar (at a lower rate).
If we are close to or just over a higher income tax bracket, we can seriously consider reducing our chargeable income. Instead, if our chargeable income is $20,000, we don’t have to do anything as the first $20,000 do not require income tax payments.
Read Also: 8 Ways You Can (Legally) Reduce Your Income Tax For YA 2025
#4 Manage Your Income (If You Have A Side-Hustle Or Own A Business)
While there’s nothing we can do to reduce our personal income tax, we can still make financial moves to optimise our income tax payments if we have a side-hustle or are self-employed.
For instance, we may want to recognise income in calendar year of 2024 or 2025, depending on how much personal income tax we have to pay.
Similarly, if you have upcoming payments to make, you may want to consider whether they can be recognised in 2024 or 2025 as well.
Of course, you should check with your accountant before making such moves!
#5 Manage Your Deductions
If we are planning to reduce our personal income tax by making top-ups to our CPF Special Account or MediSave Account, or considering SRS top-ups, we should ensure that we have enough liquid money to make the top-ups.
Maximing the schemes means we need $31,300 in cash to make the top-ups. We may or may not be able to cough up that kind of money at short notice.
The same thing applies to making charitable donations.
There are also other things that can be managed, including our Parenthood Tax Rebate (PTR), since we can share it with our spouse.
Make It A Year-End Tradition To Assess Your Tax Situation
Create a plan before the current tax year ends to reduce last-minute stress and potentially having to find liquid cash to make some of the financial moves we intended.
Failing to act before the end of the year means you may be leaving money on the table. The last thing we want is to realise in April 2025 that we could have significantly reduced our tax bill by making financial moves in 2024.
Obviously, it will be too late by then. The next best we can do is enjoy the tax efficiency by making the financial moves in 2025 for YA2026 – but it may or may not pan out again, as it will depend on our income and deductible in 2025.
Preparing for tax season isn’t just about meeting a deadline. It’s about making the most of the reliefs and deductibles available to us. By thinking about our tax returns before the calendar year ends, we can save money and minimise stress when filing in March-April.
It’s a gift to our future selves.
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