If you are under the age of 65 and want to know whether you are entitled to any tax relief for medical expenses that you were not able to claim from your medical scheme, you need to do the following calculation.
- Work out how much you paid in medical scheme contributions for the tax year.
- Work out your medical fees tax credit for the tax year.
- Multiply the medical scheme fees tax credit by 4.
- Subtract the answer in 3 from the answer in number 1. If your contributions are less than the medical scheme fees tax credit, use 0 as your answer for this step.
- Add up all your unrecouped expenses for the tax year.
- Add the answers from step 4 and 5 together.
- Multiply your annual taxable income by 7.5%.
- If the answer from step 6 is less than the answer in step 7, you have nothing to claim. If the answer in 6 is higher than the amount in step 7, subtract the answer in 7 from the answer in 6.
- Multiply the answer from step 8 by 25%.
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Sam earns R38 000 a month and contributes R3000 to a pension fund. Sam’s family’s medical scheme contributions amount to R7 200 a month for a family of four. Sam’s child has medical expenses that the scheme did not pay for amounting to R2 000 a month for 10 months.
The medical scheme fees credit is R347 a month each for the first two dependents and R243 a month for any subsequent dependents.
- Sam’s medical scheme contributions for the year are R86 400 (R7200 x 12)
- Sam’s medical tax credit for the tax year amounts to R14 160 ((R347 + R347 + R243 + R243) x 12)
- Four times the medical tax credit is 4 x R14 160 = R56 640
- Sam’s contributions exceed this credit by R29 760 (R86 400 – 56 640)
- Sam’s unrecouped expenses are R20 000 (R2 000 x 10)
- The total of step 4 and 5 = R49 760
- Sam’s annual taxable income is R420 000 ((R38 000 x 12) – (R3000 x 12)) = R420 000. 7.5% of Sam’s taxable income is R31 500
- The total of the allowed contributions and additional expenses less 7.5% of Sam’s taxable income is R18 260 (R49 760 – R31 500)
- 25% of R18 260 is R4565.
Sam will be entitled to deduct a medical tax credit of R18 725 (R14 164 as a medical scheme fees tax credit and R4561 as an additional medical tax credit) from income tax owed in the current tax year.
The example shows how your expenses need to be quite high before you enjoy the rebate.
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Example