Despite getting salary increase, last year I paid less income tax. Like 40% less. Here’s how you can do the same like me.

And it’s perfectly legal!

Last year, I managed to cut about 40% of my income tax. So instead of paying the full amount, I paid only 60% of the amount – even though I got my salary increase.

What 40% means…

If the income tax incurred is $100, that means it’s $40 getting saved.

If the income tax incurred is $1,000, that means it’s $400 getting saved.

If the income tax incurred is $3,000, that means it’s $1,200 getting saved!

If the income tax incurred is $5,000, that means it’s $2,000 getting saved!!

Well, I can keep continue writing how much money getting saved here, but I guess you get it already. In case your income tax is higher than what’s written here, just discount it by 40% to get your own number.

get more salary from job jilaxzone.com
Paying less tax means more money for myself!

With $2,000, it’s more than enough to buy a brand new iPhone and it’s literally buying iPhone by doing nothing but executing this tax savings strategy!

For your case, you may even get bigger tax cut – or smaller, depends on your income level, situation, country of residence and the tax rules of the country where you stay.

The above number is just for illustration only. Due to I’m still a 9-6 fulltime employee, I can’t really publish my income tax here – to avoid any unnecessary unwanted noise/incidents.

It’s no math error!

How come salary increases but tax payment decreases?! Try not to scratch your head 🙂

In case you may think, how is that possible? Is that even legal? Like officially legal?

I’m loudly and proudly say to you, “Yes it is”!

There are actually ways to legally evade, cut, discount, rebate, relief or whatever the language is to reduce your tax payment.

On this article I walk you through the step by step and give you the illustration on how to get tax discount despite getting higher salary.

Since my situation and my country of residence and tax rules could be different from you, please use this article as a guidance for you to look around and find any rebate, relief, cut, discount you can get.


In case you are having difficulty reading this article, do consider to open it on your PC/Mac browser or if you are using mobile phone, try open the actual page – and not the Google AMP page.


Math lesson #1: Know the formula – Google your local IRA

Like when you are learning math in school, the moment you know what is the formula to use, the rest is going to be pretty easy to know and get the result.

Same goes with income tax. The key is to know the formula. The formula I meant here is what are the tax cut/relief/discount options available that you can use to reduce your income tax payment.

Please don’t be lazy. Spend some of your free time to search for the tax formula. It will surely pay you off down the road. For my case, I managed to cut and save 40% of my tax payment. Anyway, in today’s world, information is freely available anywhere on the internet. So your best friend here is Google. Start googling to find what are the options available on your local state to reduce income tax.

I’m currently staying in Singapore and like I said before, I am a 9-6 employee so each year I need to pay my personal income tax to the Inland Revenue Authority (IRA, or here in Singapore is called IRAS).

In Singapore, luckily all those tax cuts and rebates are all stated on the official IRA website. And to my surprised back then, there’s plenty of rebates and tax cuts one person can get here in Singapore.

Here are the list.

Do take your time to read and understand all these entries in the list. In case you need help, feel free to reach me by commenting on the comment section down below, I’ll be gladly to help – free of charge!

Tax ReliefDescription
Course Fees Relief For those who are taking courses and get professional certifications, can get up to $5,500 in tax relief.

For more details, you can have it checked here:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Course-Fees-Relief/
CPF Cash Topup Relief For non-Singapore residents, think CPF just like US 401K plan – a contribution pension account.
You can get up to $14,000 in tax relief if you are topping up CPF: $7,000 to your own CPF account and $7,000 to your spouse or parents CPF account.

Since CPF is basically pension account which earn interest, the earlier you topping up, the more benefit (read: interest) you are getting. Do it the earliest possible.

For more details, you can have it checked here:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/CPF-Cash-Top-up-Relief/
CPF Relief Another CPF relief, how much you can get depends on how much your CPF contributions are. If you are contibuting $20,000 to CPF account, then you’ll get $20,000 in tax relief.

For better understanding, do check the following link:

if you are employee:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/CPF–Central-Provident-Fund–Relief-for-Employees/
If your employer is participants of auto-inclusion scheme, you don’t need to file this relief as it will be auto-inluded as part of tax relief.

If you are self-employed:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/CPF–Central-Provident-Fund–Relief-for-Self-Employed/
Earned Income Relief If you are below 55 years old, you’ll get $1,000 in tax relief
If you are 55-59 years old, you’ll get $6,000 in tax relief
If you are 60 years old and above, you’ll get $8,000 in tax relief
This Earned Income relief is auto-included as part of relief on each year Income tax.

For more details, you can have it checked here:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Earned-Income-Relief/
Foreign Maid Levy Relief To encourage woman to stay in the workforce, if you have foreign maid, you can get up to $1,440 in tax relief. This relief is only applicable for woman.

For more details, you can have it checked here:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Foreign-Maid-Levy–FML–Relief/
Handicapped brother and sister Relief You can get up to $5,500 in tax relief if you have and support your handicapped siblings/siblings-in-law.

For more details, you can have it checked here:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Handicapped-Brother/Sister-Relief/
Life Insurance Relief You can get up to $5,000 in tax relief if you are paying life insurance and at the same time your compulsory CPF contribution was less than $5,000.

For more details, you can have it checked here:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Life-Insurance-Relief/
NSMan Relief If you are NSman, you can get from $1,500 to $5,000 in tax relief. If your are married, your wife can get $750 in tax relief. Your parents, each can get $750 in tax relief as well.

For more details, you can have it checked here:
https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/NSman-Relief–Self–Wife-and-Parent-/
Parents Relief You can get from $5,500 to $9,000 in tax relief if you are staying/taking care of your parents/grandparents.

For more details, you can have it checked here:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Parent-Relief-/-Handicapped-Parent-Relief/
Spouse Relief If you are married and your spouse is not working or has annual salary not exceeding $4,000, you can get $2,000 in tax relief.

For more details, you can have it checked here:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Spouse-Relief/-Handicapped-Spouse-Relief/
SRS (Supplementary Retirement Scheme) Relief SRS is basically Government initiatives to encourage people to save more for retirement, apart from contributions made to CPF. SRS is tax free before withdrawal. You can get up to $37,500 in tax relief if you contribute up to the same amount.

For more details, you can have it checked here:
https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Special-tax-schemes/Supplementary-Retirement-Scheme–SRS-/SRS-contributions/
Qualifying Child Relief If you have child below 16 years old or child doesn’t have annual income more than $4,000 or child is doing full time study at university, college, or any other educational institution, you can get $4,000/child in tax relief.

For more details, you can have it checked here:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Qualifying-Child-Relief–QCR–/-Handicapped-Child-Relief–HCR-/
Working Mother Child Relief If you are working woman with child, you can get up to 15% tax relief of your annual salary for 1st child, 20% tax relief of your annual salary for 2nd child, and 25% tax relief of your annual salary for 3rd child and beyond. This tax relief is only applicable for woman.

For more details, you can have it checked here:
https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Working-Mother-s-Child-Relief–WMCR-/

Quite a list, huh?

On my case, from those list above, I managed to utilize these last year:

  • CPF Cash Topup Relief
  • CPF Relief(*)
  • Earned Income Relief(*)
  • SRS (Supplementary Retirement Scheme) Relief

The one with (*), is actually auto-tax-deducted if you are Singapore citizens or Singapore Permanent Residents.

In case you don’t know what CPF is, think CPF just like US 401K Plan. It’s a contribution where employer will match it. I have an article dedicated for it. Read here for more details.

Road Trip to New Zealand Southern Most Point
With the tax cut and saving, I can use the money to travel the world. In the picture is New Zealand Southern Most Point.

Math lesson #2: Know the tax bracket

Knowing the tax bracket and where you are in the tax bracket will reveal you how to maximize your tax savings.

Here is Singapore Tax bracket. For your case, look for your country’s tax bracket – they may be different from mine.

Tax BracketChargeable IncomeIncome Tax Rate (%)Gross Tax Payable ($)
1First $20,000
Next $10,000
0
2
0
200
2First $30,000
Next $10,000

3.50
200
350
3First $40,000
Next $40,000

7
550
2,800
4First $80,000
Next $40,000

11.5
3,350
4,600
5First $120,000
Next $40,000

15
7,950
6,000
6First $160,000
Next $40,000

18
13,950
7,200
7First $200,000
Next $40,000

19
21,150
7,600
8First $240,000
Next $40,000

19.5
28,750
7,800
9First $280,000
Next $40,000

20
36,550
8,000
10First $320,000
In excess of $320,000

22
44,550

All the tax bracket numbers above is coming from Singapore IRA official website, here: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Income-Tax-Rates/

Math Lesson #3: Bigger Salary is not always incur Bigger Income Tax

Now using list of reliefs from math lesson #1 that I used last year plus using tax bracket info from math lesson #2, let’s do some illustration and calculation.

Illustration 1: Annual income $36,000 (Monthly income $3,000)

If my salary is $3,000 per month. And if I’m maximizing my CPF contribution as much as $7,000, plus I do topping-up my SRS, I’m getting a 100% saving on my income tax. Which translate to: I don’t pay any income tax and it’s perfectly legal!

Here’s the illustration.

Without Tax CutWith Tax Cut
Annual Salary$36,000$36,000
CPF Topup Relief for Self$7,000
CPF Topup Relief for Family
CPF Relief (*)$7,200$7,200
Earned Income Relief (*)$1,000$1,000
SRS Relief$10,000
Total chargable income for tax (Annual Salary – Reliefs)$27,800$10,800
Tax bracket category11
Payable taxFirst $20,000: $0First $10,800: $0
Next $7,800: $156Next $0: $0
Total tax payable $156$0
Percentage tax saving100%

Illustration 2: Annual income $120,000 (Monthly income $10,000)

If my salary is $10,000 per month. And if I’m maximizing my CPF contribution as much as $7,000, I’m maximizing my family member CPF contribution plus I do topping-up my SRS as much as $10,000, I’m getting a 40%+ saving on my income tax.

Here’s the illustration.

Without Tax CutWith Tax Cut
Annual Salary$120,000$120,000
CPF Topup Relief for Self$7,000
CPF Topup Relief for Family$7,000
CPF Relief (*)$14,400$14,400
Earned Income Relief (*)$1,000$1,000
SRS Relief$10,000
Total chargable income for tax (Annual Salary – Reliefs)$104,600$80,600
Tax bracket category44
Payable taxFirst $80,000: $3,350First $80,000: $3,350
Next $24,600: $2,829Next $600: $69
Total tax payable $6,179$3,419
Percentage tax saving44.67%

When you see the difference in amount of tax payable on the illustration above, that’s $2,000+ different.

apple iphone 11 jilaxzone.com
With the tax saving, I can buy a new iPhone literally for FREE. Image courtesy of Apple.com

Now with that $2,000+ different, you can either buy a new iPhone or go travelling somewhere else on the money saved.

Time for you to research and play around with your own number

From the 2 illustrations I mentioned above, at some point, 100% tax savings is even achievable.

Now you can play around with your own number and see how much tax savings you can get if you do exactly the same like what I told you here.

Income Tax Savings Guidelines

Now for you case, in case you are not in Singapore nor a 9-6 employee like myself, as a guidelines do this.

1) Find any tax reliefs or tax cuts information.

2) Find the tax bracket of your country/state and where you are on the tax bracket

3) Play around with the numbers to see where you can maximize the tax cuts and save the money.

All the 3 items above, you can easily find on Google. Just Google your country/state IRA website. Find any reliefs or tax cuts info you can get/eligible to. Or go to forums where people discuss about tax cut like this. There’s must be group of people who does tax savings too. Alternatively, do consult with HR or Accounting department on your company, they should know a thing or two about income tax savings.

Act now. Don’t wait.

luge at sentosa jilaxzone.com
Don’ t wait. Act now and like me today, have fun on tax savings!

Current year is going to end soon, so if you plan to really save your money, do NOT delay! Start gathering those info today – before it’s too late.

For myself, this year, I’m going to do it again and enjoy the tax savings!


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