Give smart: Reduce your taxes with charitable giving and CPF contributions

Most people don’t realise this, but in Singapore, certain types of charitable giving and contributions can reduce your income tax. It’s not just about being generous, it’s also smart financial planning. And being generous doesn’t mean you have to give big. Even small amounts can make a difference for both the cause and your peace of mind.

Let’s unpack how giving smart can benefit both your heart and your finances.

Which donations are tax-deductible?

Not all giving qualifies, but donations to IPC-registered charities (Institutions of a Public Character) definitely qualify. See IRAS’ Donations & Tax deductions webpage for a full list of tax-deductible donations.

The sweet part? You get a 2.5 times tax deduction on the amount donated. So, a $100 donation means $250 is deducted from your taxable income.

IRAS automatically gets the info if you provide your NRIC when making donation to IPC, so there’s no need to submit tax deduction receipts unless requested.

Topping up CPF can reduce tax, too

These CPF cash top-ups qualify for relief:

• Top-ups to your own Special/Retirement Account — Think of this as adding extra savings into your long-term ‘retirement cash jar’. It grows at attractive CPF interest rates, and you get tax relief now for setting aside money for your future.
• Contributions to your MediSave Account
• Top-ups to your parents’, grandparents’, spouse’s, and/or siblings’ CPF accounts
  
  • Special/Retirement Account; and/or
  • MediSave Accounts
  (Note: For spouse or siblings, they must not have an annual income of more than $8,000 in the year preceding the year in which the top-up was made. However, this condition does not apply to spouse and/or siblings with disability)

The cap is $8,000 for yourself and another $8,000 for family members, making it possible to reduce your taxable income by up to $16,000.

Topping up your Supplementary Retirement Scheme (SRS) account helps, too

The SRS is a voluntary savings scheme that offers tax relief.

• You can get dollar-to-dollar tax reliefs, up to $15,300 (for Singapore Citizens/ PRs) or $35,700 (for foreigners) in tax reliefs per year when you contribute.
• Funds can be invested in options like ETFs, unit trusts, or Singapore Savings Bonds.
• After the statutory retirement age (determined at the time of first contribution into the SRS account), withdrawals are only partially taxable (50%), which helps you save on taxes long-term.

It’s flexible, and a smart way to grow your retirement savings while cutting down your current tax bill.

How to get started if you have not opened an SRS account?

You may approach any of the following 3 appointed SRS operators/ banks to open it and start your contributions:

• DBS Group Holdings Ltd
• Overseas-Chinese Banking Corporation (OCBC) Ltd
• United Overseas Bank (UOB) Ltd

Do bear in mind that you can only hold one SRS account at any time and cannot open another account with a different operator. However, if you wish to change your SRS operator, you may do so by completing the ‘Transfer of Account Form’ from your new operator. The new operator will then coordinate directly with your existing operator to effect the transfer.

All these are ways you can reduce the taxes you’ll need to pay, so they’re worth exploring before you file your tax return.

Find out more about tax reliefs and deductions at IRAS’ webpage.