HOW TO SAVE TAX ON MEDICAL AID CONTRIBUTIONS

An article by our listed accountant Mr Riaz Mohammed Alli  (see his profile)

In terms of section 18 taxpayers are permitted to deduct certain prescribed medical aid contributions and certain medical and dental expenses from their income. The contributions which qualify for deduction are contributions made by the taxpayer during the year of assessment to any medical aid scheme (in terms of the Medical Schemes Act) or to any similar scheme in the country. The contributions must be in respect of the taxpayer, his spouse, any child and any dependent of the taxpayer who was admitted as a dependent under the Medical Scheme. There is a limit per person. A fourth restriction is imposed in respect of employee contributions. The amounts must be reduced by any contribution made by the employer of the taxpayer to the extent that it is not included in his gross income.

Medical Expenses
The taxpayer may claim a deduction of payments to registered medical practitioners, registered nursing homes and to registered pharmacists. The amounts paid must be in respect of the taxpayer, his spouse or his spouse’s children. The taxpayer may deduct any amounts paid by him or her in respect of expenditure incurred outside the Republic on services or medicine. If any expense is recoverable by a taxpayer or his or her spouse, it cannot be deducted under this section.

Physical impairment or disability
 The taxpayer may deduct any expenditure necessarily incurred and paid by the taxpayer in consequence of any physical disability suffered by the taxpayer or his spouse or any child or any dependent. With effect from 1 March 2009 the disability expenditure rule is changed. From that date the taxpayer may deduct any expenditure that is prescribed by the Commissioner, necessarily incurred and paid by the taxpayer in consequence of any physical impairment or disability suffered by the taxpayer, his or her spouse, child, or dependent. For the purposes of the section child means any child (including an adopted child) of the taxpayer or his spouse who meets the following requirements (s18(4)):

Under 18 years of age
The taxpayer will qualify for the deduction if the child is under 18 years old, and it unmarried.
18 to under 21 years old
The taxpayer will qualify for the deduction if the child is unmarried, wholly or partially dependent for his maintenance upon the taxpayer and not liable for the payment of normal tax.
Any Age
The taxpayer will qualify for the deduction if the child is incapacitated by physical or mental infirmity from maintaining himself, wholly or partially dependent for his maintenance upon the taxpayer and not liable for the payment of normal tax for the year.

LIMITATIONS
If the taxpayer is over 65 there is no limit on the deduction.