In 2012, SARS began making adjustments to the way medical expenses were factored for tax purposes. The system at that time allowed for higher refunds for deducted medical expenses if you earned a higher income. Since then, the changes have sought to make deductible medical expenses more equal across all income levels.
Effective March 2012 SARS introduced what is known as a Medical Scheme Fees Tax Credit. First, your medical aid contributions are deducted against your taxable income. This medical credit is a tax credit, which is deducted from your overall tax liability. The medical tax credit consists of two amounts:
- The medical scheme fees tax credit
- The additional medical expenses tax credit
Medical scheme fees tax credit
This tax reimbursement applies to the contributions paid by you (as the taxpayer) to a registered medical scheme on behalf of yourself and your dependents. The main member, as well as the first dependant on the medical scheme, will receive a monthly tax credit of R310 (for the 2018-2019 tax year). All additional dependants will receive a monthly tax credit of R209 (for the 2018-2019 tax year).
If you are paying your contributions via your employer, i.e., as a deduction from your salary or wages, your employer is now obliged to use the credit system to adjust your monthly PAYE tax accordingly. If you contribute to a medical scheme independently from your employer, you will receive the tax credit on assessment when you complete your tax return.
Additional medical expenses tax credit
This is a tax rebate, which means that the overall amount of tax you need to pay at the end of the tax year is reduced. The amount of your tax rebate is made up of all the extra money (out-of-pocket expenses) you have spent on qualifying medical expenses which weren’t covered by your medical scheme. This amount accumulates throughout the tax year.
Qualifying out-of-pocket expenses include:
- Consultations, services or medications from a registered medical practitioner, orthopedist, physiotherapist, dentist, chiropractor, herbalist, homeopath, optometrist, osteopath or naturopath
- Admission to a registered hospital, including nursing homes
- Care at patient’s home by a registered nurse, nursing assistant, nursing agency or midwife
- Medicines prescribed by a duly registered physician and acquired from a duly registered pharmacist
- Medical expenses on services rendered or medicines supplied outside of South Africa and which are substantially similar to the services and medicines listed above
- Money paid towards the treatment of a physical impairment or disability (as long as it is a qualifying expense prescribed by the commissioner)
- It is important to know that “over the counter” medicines, such as cough syrups, headache tablets or vitamins, do not qualify as medical expenses unless specifically prescribed by a registered medical practitioner and acquired from a pharmacist.
Once you know the basics, medical scheme fees tax credits are not only easy to understand but can be a welcome relief on your pocket too.