What are the benefits to belonging to a medical aid from a tax perspective?

What are the benefits to belonging to a medical aid from a tax perspective?

Most people cannot afford belonging to a medical scheme. For this reason SARS introduced the medical scheme fees tax credit. When calculating how much your tax will cost you per month you should also include the tax benefit. I will therefore explain the benefit of the tax credits by applying it to an example.

First of all it is important to know that there are two rebates from SARS that affects your income tax. The 1st one is known as: Medical Scheme Fees Tax Credit “MTC” and the 2nd as Additional Medical Expenses Tax Credit "AMTC". Only the first one (the MTC) will influence your cash flow every month. Both of these tax credits will however influence the amount of your tax liability/refund. I will gladly assist you in calculating your rebate. Please do not hesitate to contact me.

The Medical Scheme Fees Tax Credit “MTC” is a rebate that reduces your normal tax liability. If you are this a salary earner it will reduce the PAYE you need to pay every month with the rebate amount. This effectively means more money for you as you do not need to pay SARS.

How much is the rebate?

R286 per month for the taxpayer who paid the medical scheme contributions
R286 per month for the first dependant
R192 per month for each additional dependant(s)

 

Let me explain: Say you are a family of four:  a mom, a dad and two children. You are a salary earner paying R1200 a month on PAYE. You get a quotation from a medical aid that it will cost you R3500,00 per month to belong to the scheme - how much will it really cost you?

FAMILY OF FOUR

BUDGET IS TIGHT

HOW MUCH WILL THE R3500 PER MONTH MEDICAL AID ACTUALLY COST?

 

 Your rebate will be R286 + R286 + R192 (x2) = R956. This means you will pay R956 less PAYE per month (R1200 – R956).

It will effectively mean that you are only paying R2544 per month for the benefit to belong to a medical aid.

I would not like to go into much detail of the benefits of belonging to a medical aid. We all know that to have access to private medical care (instead of having to rely on public health services), is priceless.

In my next article I will explain the working of the Additional Medical Expenses Tax Credit.

If any queries - please do not hesitate to contact me.