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Don't be confused about the new medical scheme deductions

10 July 2006 Ian Dodds

With five working days to go before the July 14th tax deadline, SARS officials and tax specialists are reporting that many tax payers have been confused with respect to allowable medical scheme deductions.

A snap survey revealed that taxpayers are under the impression that the new tax rules regarding allowable deductions for medical scheme expenses introduced in March this year, apply to the current tax year.

Financial advisor Ian Dodds confirmed that the new dispensation will apply to 2007 tax returns.

Changes introduced with effect from March this year enable all taxpayers, salaried as well as self employed, to claim deduction spent on medical schemes. New regulations make provision for the tax contributions of R500 per month for the first two beneficiaries and R300 for each additional beneficiary, he said.

He said that in the 2007 tax year, self employed people would be able to claim deductions for belonging to a medical scheme for the first time.

Tax payers over the age of 65 are not affected by the new rules as they are permitted to deduct all medical scheme contributions and other medical expenses from their taxable income, he said. Non tax payers are obviously not affected by the changes.

Dodds said that families joining medical schemes for the first time should consider their options carefully. It may be to the advantage of certain families, where there are two tax payers in the family, to belong to two separate medical schemes. It is illegal for an individual to be a member of two schemes at once, but it may be feasible for example, for one adult and one child to join one medical scheme and the other adult and other children to join another scheme.

Besides the advantage of tailoring a particular medical scheme to the profile of the principal members and dependants concerned, a family of two principal members and two beneficiaries could save up to R4 800 a year, he said.

Ian Dodds, Fundamental Investments

 


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