5 Tips to maximise your tax savings

Tax season can be a scary and maybe even overwhelming time, but with some clever planning and using our tips, you can legally reduce your tax bill and keep more of your hard-earned money.

That's right.

You don't HAVE to pay as much tax as you might expect.

Here are our top 5 quick tax deduction tips

1. Contribute to a retirement annuity

If you're paying money into a retirement annuity each month, you can deduct 27.5% of total income and up to a maximum of R350 000 per tax year for both your own and your employer's contributions to your retirement products.

That's a pretty sweet deal because, chances are, you're already contributing to a retirement annuity each month, and if that's the case, you can score a nice tax deduction for it.

An example:

You earn R300 000 in a tax year (from 1 March to 28 February the following year), and say you didn't make any contributions to a retirement product; then you will be taxed on the full R300 000 you have earned (approximately R41 800 in tax). But say that you have contributed R30 000 towards a RA during the same tax year; SARS will only tax you on R300 000 - R30 000 = R270 000 of income. The tax on this is around R34 000; therefore, you would have saved R7 800.

So effectively, you got a R7 800 return in the first year of saving only R30 000. That's a return of 26% in one year! Another way of looking at it is that you actually only forked out R22 200 but have an immediate investment of R30 000 - SARS funds that extra
R7 800 for you. Unbelievable but true!

2. Capitalise on tax-free savings accounts

SARS has exempted all the income and growth you earn in your tax-free savings account to encourage South Africans to save more money. For example, this investment's interest, dividends and capital gains are tax-free. Should you eventually draw an income from this investment, the income will also be tax-free.

You're allowed to save up to R36 000 per year into a tax-free savings account, with a lifetime limit of R500 000.

If you're unsure where to start with opening your tax-free savings account, why not book a free consultation with a Velocity Club Money Coach? We can help you set up a personalised financial plan and discuss all the info you need so you can start benefiting from these tax deductions.

3. Make the most of medical aid deductions

SARS allows for medical aid deductions against your tax bill, which can substantially affect how much tax you need to pay. Depending on your income bracket, you can claim tax credits for your medical aid contributions and certain out-of-pocket medical expenses, particularly doctor's visits and prescription medication.

4. Claim business expenses if you're self-employed or if you have a side hustle

If you're self-employed or running a side hustle [well done!] you can claim various business expenses to reduce your taxable income.

Some of these deductible expenses include rent for your office space, utility bills, office supplies, software, computer hardware, advertising costs, travel expenses, and professional development courses. Keep accurate records of your expenses, and don't forget to keep those receipts!

And no, unfortunately, all those UberEats orders aren't tax-deductible 😢

5. Claim work-from-home deductions

You don't have to be a freelancer to benefit from tax deductions while working from your home office. Provided your remote job meets certain strict criteria from SARS, you too can claim certain deductions on your tax bill.

To be eligible to claim any working-from-home tax deductions, your job must fall into one of these categories:

• You earn more than 50% of your total salary by commission, AND you don't spend most of your time at the company offices.
• You're an independent contractor.
• You are a full-time employee working more than half of your total working hours from home.

The big one is that you'll need a letter from your employer granting you permission to work from home and specifying the percentage of time you spent working from home. Or you just need to be able to show a clause in your employment contract specifying the fact that you will work from home.

If you'd like to know if your home office space qualifies and how to calculate claimable expenses, click through to this blog post here: Working from home? Here's how you could pay less tax.

The longer you leave it, the more you miss out

If you're not already contributing to a retirement annuity or tax-free savings account, you are literally leaving money just lying there on a virtual table. And if you don't take action to make that money yours, SARS simply puts it back into their coffers.

Similarly, if you're not savvy and claiming the deductions you're entitled to claim, you're paying too much tax for no reason.

Don't pay more tax than you need to. Book a free consultation with a Velocity Club expert today and learn how you can benefit from a personalised financial plan that will include assistance with tax planning.