It’s December already which means this is the last month that you have to do whatever tax savings you can do for the next tax assessment happening in the first quarter of next year. There are several ways for you to save on paying income tax by taking advantage of some tax exempted expenditures, and I’m sure you’ve read them year in and year out.

Some of these tax exempted expenses include buying books up to RM1,000 for the year, making donations, buying a computer (note that the tax exemption on this is only applicable once in 3 years), buying sports equipment, paying for your family medical expenses and equipment (parents, spouse and children included, however this is specifically for serious medical conditions only), purchasing insurance policies, buying education policies for your children, even taking up an MBA for yourself, and a few others.

The question to ask yourself when you are trying to save on paying taxes is that whether you are really doing it wisely. You do realise that in order for some part of your taxable income to be exempted, you need to spend in some of the above mentioned items. Whilst most of them are very practical and useful investments (books, education, insurance policies), they are still expenses on you. So really, you need to spend in order to save on your taxes. At the end of the day, if you are spending on what you don’t need, you are not making sense to save on your taxes. Let me give you an example on this.

Let’s say you want to minimize your taxes by increasing the exemption on book purchases up to RM1,000. So out you go and hit your favourite bookstores and ring up the bill to make it RM1,000 for the year. However, what you end up buying aren’t really necessary stuff and you’re only picking them up for the sake of getting that receipt as prove of purchase for your tax assessment.

So let’s just say that your RM1,000 spent on books is able to save you about RM100 on taxes. So think about it, is it a savings or a loss?

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Money management, Personal finances