Medical aid tips

2008-09-05 00:00

Dear MoneywebTax.co.za, I am married in community of property. My salary is in the minus 30% tax bracket while my wife’s is in the lowest tax bracket. I contribute to a medical aid scheme that has a 25% medical aid saving portion. My employer contributes to my medical contribution as part of my package. My average yearly medical expenses are about R12 000, from which I pay about R8 000 (private rates, medication not reimbursed by medical aid, etc.) Because the expenses not covered by my medical aid do not significantly exceed the threshold at which I can claim in my tax return, I don’t list these expenses.

The questions

• When my wife completes her tax form, can a portion of the medical expenses not covered by my medical aid qualify as an expense on her income?

• Will it be better for us if I cancel my medical aid benefit from my employer (about R2 300 per month) and take out medical insurance under her name (her employer does not give medical aid benefits), and then deduct the full amount of medical expenses from her salary?

Answer

Where an employer contributes to a medical scheme, such a contribution is tax free in the employee’s hands to the extent that the monthly contribution does not exceed the “capped amount”.

This capped amount is as follows:

2007/08 tax year 2008/09 tax year

Principal member R530 per month R570 per month

First dependent R530 per month R570 per month

Additional dependent R320 per month R345 per month

If the employee makes contributions to a medical scheme and the employer contribution does not exceed the monthly cap, the difference between the portion contributed by the employer and the cap can be deducted in full (limited to the amount contributed by the employee). Any excess is subjected to the 7,5% rule (see below).

Private members of medical schemes may deduct in full the portion of their contributions that do not exceed the capped amounts. Expenses not recovered by a medical scheme can also be deducted, as can physical disability and “handicap” expenses. The 7,5% rule applies to normal medical and physical disability costs, while those incurred as a result of a “handicap” (as defined by Sars) are fully deductible. The rule applies to taxpayers under the age of 65 years. For such taxpayers, medical costs falling within this rule are reduced by 7,5% of taxable income before taking into account such costs. Therefore, in the case of a married couple it is usually advisable for such costs to be paid by the spouse with the lower taxable income. Section 18 of the Income Tax Act stipulates that such costs may only be claimed by the person who actually pays such costs.

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