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Medical tax credits and Sars codes

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A Fin24 user wants to know which Sars code to use for additional medical tax credits. He writes:

For the 2015 tax year, when trying to work out additional medical tax credits, does one use the value under Sars code 4005, 4474 or 4497 for the medical scheme contributions in the calculation?

Pieter-Jan Bestbier, a director of auditing firm LDP, responds:

The deduction codes on your IRP5 will not have an influence on the calculation of the monthly medical scheme tax credit as this amount is calculated monthly, based on the number of members belonging to a registered medical scheme.

Code 4005 is the amount that is contributed towards the medical aid by the employee and code 4474 are the contributions by the employer.

The amount reflected under code 4474 should be equal to the amount reflected under code 3810, which is the fringe benefit for the employer contributions.

The amount reflected as code 4005 should be equal to the total contributions as per the medical aid contributions certificate. This amount will be used in the first part of the medical expenses tax credit calculation - fees paid to a medical scheme exceeding four times the amount of the medical scheme fees tax credit.

Code 4497 is for the total deductions as per the IRP5 certificate and this amount will not be used in any calculations.

For years of assessment commencing on or after March 1 2014 the monthly medical scheme tax credit is as follows:

- R257 for the taxpayer;

- R514 for the taxpayer and one dependant or

- R514 for the taxpayer and one dependant, plus R172 for each additional dependant.

The additional medical expenses tax credit will be 25% of so much of the aggregate of:

- The amount of fees paid to a medical scheme as exceeds four times the amount of the medical scheme fees tax credit, to which that person is entitled; and

- The amount of qualifying medical expenses paid by the person as exceeds 7.5% of the person’s taxable income (excluding any retirement lump sum benefit, retirement lump sum withdrawal and severance benefit).

- Fin24

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