2 Dec 2024
SOURCE: CPF Board
December is a time to give yourself a much-needed break for another year that has flown by.
But beyond the celebrations, the end of the year is also a good time to review your total taxable income and look at other ways to reduce it through income tax planning.
How your income tax is calculated
Year of Assessment (YA)
Your tax bill is based on your total taxable income and tax deductions from the previous year. This means that your 2025 tax bill would be based on your income and deductions from 2024.
As the year comes to an end, there are last-minute deduction and charitable donation options that you can make to minimise your tax bill for the upcoming year.
To calculate your income tax, subtract any eligible deductions from your total taxable income.
Taxable income
This includes your employment income, trade income for the accounting year (for business owners), and other income such as rental earnings.
The income tax rate bracket varies based on your chargeable income—the higher your chargeable income, the higher the tax rate.
Deductions
Tax reliefs such as making a top-up to your Special Account or Retirement Account and charitable donations are just a few examples of tax reliefs that can reduce your taxable income.
By maximising your tax reliefs, you can lower the portion of your income that is subject to tax.
How to increase your tax reliefs before the end of the year
1. Maximising CPF top-ups
One of the simplest ways to earn tax relief is by topping up your CPF savings through the Retirement Sum Topping-Up Scheme (RSTU).
By making cash top-ups to your CPF savings, you can enjoy tax relief of up to $8,000 a year while growing your retirement nest egg. If you make a cash top-up to your loved ones, you can also receive an extra $8,000 in tax relief annually.
An important point to note is that tax reliefs for top-ups to both you and your loved ones are only applicable for cash top-ups to the Full Retirement Sum (FRS). Remember to make the top-up by 31 December to qualify for tax deductions in the following year!
2. Year-end charity contributions
Making charitable donations to approved Institutions of Public Character (IPCs) gives you tax relief amounting to 2.5 times your qualifying donation.
When donating, remember to provide your particulars (NRIC/FIN) to the IPC for the Inland Revenue Authority Of Singapore (IRAS) to include in your tax returns.
Head over to Giving.sg, a one-stop national giving platform by the National Volunteer and Philanthropy Centre, where you can donate to charitable causes that are close to your heart.
3. Attend a course to upskill yourself
If you’ve attended a course this year, you can also gain up to $5,500 in tax reliefs by attending a course that upskill yourself and increase your employability.
Take note that any amount paid or reimbursed by your employer, or any other organisations (including the use of SkillsFuture Credit) cannot be claimed as relief.
Bonus tip: review your CPF nomination
The end of the year is also a great time for you to take stock of your financial situation and plan your finances for the year ahead.
As part of responsible financial planning, take a moment to review your CPF nomination to ensure that your CPF savings are distributed according to wishes. If you have made a CPF nomination, your nominee(s) can claim your CPF savings swiftly. No administration fees are deducted when your nominee(s) receive your savings.
Check out these three simple quick steps to making a CPF nomination!
Reduce your income tax payable with these income tax planning tips
While the end of the year might be a good time to relax and unwind, spending an extra bit of time for tax planning can go a long way towards giving your finances a boost for the upcoming year.
Here’s wishing you a happy new year and a prosperous start ahead!
The information provided in this article is accurate as of the date of publication.
