Medical Tax Credits

Medical tax credits came into effect on the 1st of March 2012 and replace the medical scheme contribution deduction. This was introduced to achieve great equality in the treatment of medical expenses across income groups in taxpayers below the age of 65. The difference is that the medical tax credit will not be allowed as a deduction for personal income tax purpose but as a credit.

The medical tax credit is available to taxpayers who belong to a medical scheme and are below the age of 65 set at fixed amounts per month

  • R216 each month for the contributions in respect of the employee and one dependant whereas the old medical scheme contribution deduction allowed a deduction of R720 per month, plus
  • R144 per month in respect of each additional dependant.

Medical Tax Credits are claimed every month when a salary is paid because it is a tax credit and it decreases the tax liability. For an example Miss Nyoka earns a salary of R16 040 per month, makes the two contributions R800 pension and R1 000 medical aid scheme per month and has no dependants.

Here is the tax calculation example applying medical tax credits:-

  • Salary R16 040.00
  • Deductions:
  • Pension (R800.00)
  • Taxable Income R15 240.00
  • Tax payable per month R1 923.33
  • Less Medical Tax Credits (R216.00)
  • Final Tax payable R1 707.33

Example applying medical contribution deduction:

  • Salary R16 040.00
  • Deductions:
  • Pension R(800.00)
  • Medical Aid Contribution (R720.00)
  • Taxable Income R14 520.00
  • Tax payable per month R1 743.33
  • This becomes the final tax payable because medical aid contributions were allowed as a deduction whereas in the new medical tax credit is it treated as a tax credit.

If you would like assistance with the new medical tax credits, contact PATC today.