MEDICAL aid costs and general medical expenses are fairly extensively tax deductible and hard pressed consumers should not act too hastily when it comes to cancelling or downgrading their medical aid cover.
Medical aid cover is not merely a nice to have and that, while cancelling or reducing that cover may bring temporary relief to the household budget, it's in fact "false economy" that exposes you to potentially huge medical expense risk.
Retain your medical aid cover if it's at all financially feasible to do so.
While this obviously affects cash flow in the short term, a large proportion of medical expenses is deductible in a given tax year and it's far preferable to remain covered for medical costs until those deductions begin to filter through.
The tax benefits for medical aid contributions and medical expenditure are straightforward and can quite easily be explained.
The tax free allowance granted by the receiver toward medical aid contributions during a given tax year, now amounts to R670 per month for the member and the first dependant and R410 per month for every other dependant.
This works out at a substantial R2 160 deduction pm (R25 920 pa) for a family of four, applicable after Finance Minister Pravin Gordhan announced some welcome relief on the tax front for medical contributions in his Budget speech.
In addition to that, the Receiver allows against tax, your contribution that exceeds this total, together with the unclaimed portion of your general medical expenses (the amount not paid by your medical aid) where the total of those amounts exceeds 7.5 % of your taxable earnings.
Also, taxpayers over the age of 65 enjoy a full deduction for qualifying medical aid contributions and expenses while tax payers under 65 may claim all qualifying medical expenses where the taxpayer or the taxpayer's spouse or child is disabled. So taken as a whole, these deductions and potential deductions can be substantial.
It should be kept in mind however that any contribution made by the employer on behalf of the employee toward his medical aid contribution, either by way of a subsidy or a salary sacrifice is regarded as income in the hands of the employee and this has to be taken into account in your tax calculations.
The exception to this rule is where a company subsidises low income staff medical cover in which case that contribution is still 100% tax deductible for the employee, resulting in a ‘zero effect', tax wise for the employee.
Other tax free exceptions apply where contributions are made by a company on behalf of pensioners, or dependants of deceased pensioners.
The fundamental fact is that medical expenses for individuals are already substantially tax deductible and maintaining your medical aid membership is crucially important against the background of rising medical costs and the alternative of being reliant upon the State health system.
The Citizen, 17 May 2010
