Medical credits bestow a healthy little tax reduction
If you contribute to a registered medical scheme, you are entitled to a reduction in your tax liability. For the 2019 tax year (March 1 2018 to February 28 2019), you are entitled to a monthly tax credit of R310 as the main member of a medical scheme.
If you have a dependant on your medical scheme, you are entitled to an additional R310 monthly credit; any dependants thereafter will enable you to receive an additional monthly credit of R209 per dependant.
There are generally two ways in which you will see a reduction in your tax liability as a result of these medical credits.
1. Your medical scheme is processed through your payslip
If you employer processes your contributions to your medical scheme, you will receive the benefit of your medical credit on a monthly basis - that is, your monthly tax liability will be reduced by the medical tax credit. For example, if you are the only person on your medical scheme, you will pay R310 less tax on your salary each month as a result of this credit.
2. You pay for your medical scheme directly
If you have a debit order for your medical scheme contributions, you will not receive a reduction in your tax liability on a monthly basis, but you will be able to reduce your tax liability when you file your annual tax return. To do this you will need to request your medical tax certificate from your medical scheme and complete your tax return including these details.
Instead of receiving a reduction in your tax liability on a monthly basis, you will receive the benefit for the entire year when you file your tax return. If you have been the sole contributor to a medical scheme for the full tax year, then you should be able to reduce your tax liability by R3720 for the tax year.
This may, depending on your circumstances, result in a refund from SARS upon submission of your tax return.
For both of the above scenarios, it is important that you request a medical scheme tax certificate from your provider and complete the necessary details when filing your tax return.
Failure to do so may result in the South African Revenue Service disallowing the medical tax credits and your tax liability increasing. There is also the possibility of claiming an additional medical tax credit.
For people aged 65 and under you would need to have spent a large amount on medical expenses that have not been paid for by your medical scheme, for example for a cumulation of expensive prescription medicine or in-hospital doctor bills not covered by the scheme.
If you are over 65 years of age and/or disabled then there is a greater likelihood of receiving this credit.
In addition, if you are paying medical expenses on behalf of a dependant family member (such as your parents) you may be entitled to an additional medical tax credit.
Medical expenses in this regard include nursing home fees paid in respect of an illness. If you are unsure of whether you will qualify for an additional medical credit, it is best to submit all the figures to SARS on your annual tax return and they will do the calculation for you.
• Baines is the author of 'How to Get a SARS Refund' and a tax consultant at Mazars