Effective 1 April 2019, the premiums of VHIS Certified Plans are eligible for tax deductions. The premiums that a taxpayer can claim tax deduction is up to $8,000 per insured person in each assessment year. The “tax deductions” are deducted from the “taxable income” rather than directly from the “tax payable”.
You can calculate how much tax you save by using the applicable tax rate. For the year of assessment 2018/19, the standard tax rate is 15% and the marginal tax rates are 2%, 6%, 10%, 14% and 17%. Based on the tax deduction cap of $8,000 and the highest tax rate of 17%, a taxpayer can save up to $1,360 on tax per insured person in each assessment year.
Simply put, the higher the taxable income, the higher the applicable tax rate. By the same token, different incomes will yield different tax savings. For instance, two taxpayers are purchasing Certified Plans for themselves, and the annual premiums are both $5,000, if taxpayer A is paying a marginal tax rate of 17%, he/she could save $850 ($5,000 x 17%) each year. For taxpayer B, who is paying tax at a marginal rate of 6%, he/she can only save $300 ($5,000 x 6%) on tax each year.
More tax savings when purchasing policies for family members
Taxpayers can also purchase policies for their specified relatives and claim tax deductions on the premiums paid for each insured person. There is no limit to the number of policies and the number of insured persons when it comes to claiming tax deductions.
Specified relatives include (for a detailed definition please see Question 37 in the FAQ section on the official VHIS website):
- the spouse and children of the taxpayer;
- the grandparents, parents and siblings of the taxpayer;
- the grandparents, parents and siblings of the spouse of the taxpayer.
For example, the following table shows the tax deductions for a taxpayer purchasing VHIS products for himself / herself and his / her father and mother:
|Annual premiums||Amount of tax deductions
(capped at $8,000)
(assuming a tax rate of 15%)
You can refer to the official VHIS website for more examples of tax deductions. Last but not least, the tax deductions are set out to encourage citizens to purchase VHIS Plans, so that they can enjoy better medical protection. When purchasing hospital insurance, the first and foremost important point to consider should be the level of protection. Consumers should consider their own needs and budget, carefully compare the contents and premiums across various products, and read the policy terms thoroughly to understand their own rights and responsibilities when choosing suitable products.
28 May 2019