New Medical Deductions
There have been many mixed reactions to the new structure of the Medical Credits for 2013.
For tax payers below the age of 65, the medical capping will be replaced by a monthly medical tax credit of R230 for the main member and first dependent and R154 for each additional dependent.
To illustrate the difference between the old and new rules:
Month Salary : R10,000
Dependents on medical Aid – Husband, Wife and two children
Monthly medical Contribution is R4000 (Employer contribution)
Taxpayer is under 65 and 2013 taxtables used in both scenarios
Old New
Annual Salary 120 000 120 000
Med Aid 48 000 48 000
Taxable Earnings 168 000 168 000
Less Med Aid Cap -27 840 (R740 x 2 +R440 x2 pa)
Taxable Income 140 160 168 000
Tax 25 228 30 800
Less Med Aid
Tax Credit -9 216 (R230 x 2 + R154 x 2 pa)
Less Primary Rebate -11 440 -11 440
Total Tax Payable 13 788 10 144
Should the tax payer earn R15 000 per month, have three dependents on his/her medical aid then their benefit will only be R1 728 as it does not migrate from one tax bracket to another.
The nett result is that SA tax payers will most likely be in a better tax position regarding the medical changes.