Deductions for Medical Expenses

There are two categories of medical expenses that you may deduct from your taxable income:

1. medical scheme contributions credits
2. additional medical expenses

What is a fringe benefit?

Medical scheme contributions by your employer are an example of a fringe benefit, which is a non-cash benefit granted to employees. Although you do not receive anything in cash, a fringe benefit must usually be included in your taxable income, as it still falls under the definition of “gross income” and therefore you pay tax on fringe benefits. However, often you may claim a rebate (a tax refund) in respect of a fringe benefit. A medical scheme contribution credit is an example of a rebate that you may claim in respect of a fringe benefit.

1. Medical Scheme Contribution Tax Credit (MTC)

The first type of deduction that can be claimed for medical expenses is the medical scheme contribution tax credit (MTC), which is a non-refundable rebate which you can claim if you make contributions to a medical scheme for yourself and dependents.

Requirements:

1. Only claimable by the person who actually paid for medical aid.
2. If an employer pays medical aid for the employee taxpayer as a fringe benefit then this is deemed to be paid by the taxpayer themself
3. Rebate can only be claimed against taxes payable and cannot result in a refund.

If you are employed, your employer is required to take the MTC into account when withholding PAYE. Therefore, if your employer pays your income tax on your behalf in the form of PAYE, you do not need to calculate the MTC yourself (although you should check whether it is indicated on your tax return). If you are self-employed, you have to claim the MTC yourself.

The following amounts can be claimed in respect of the MTC for the 2022 year of assessment:

Contribution for	Monthly credit
Main member	R332
First dependant	R332
Additional dependants	R224

2. Additional medical expense tax credit / AMTC

This credit can be claimed by a taxpayer for certain qualifying medical expenses during a year of assessment.

Qualifying medical expenses are those expenses which meet these basic requirements:

1. expenses not covered by medical aid
2. paid to a registered medical practitioner (or pharmacist for prescribed medicine)
3. for services / medicine supplied to a taxpayer or dependant of a taxpayer

In order to claim an additional medical expense tax credit, you need to keep documentary record of the invoices which SARS may request up to five years after the credit was claimed.

The amount that can be claimed as an additional medical expenses tax credit (AMTC) depends on the person’s age and whether the person and/or their dependants has a disability.

A person who is 65 years old or older / a person who has a disability / a person whose dependant has a disability, may claim the following AMTC:

• 33,3% of the fees paid by the person to a registered medical scheme as exceeds three times the amount of the MTC to which that person is entitled plus
• 33,3% of the qualifying medical expenses paid by the person.

A person who does not fall under the above description, may claim the following AMTC:

25% of the amount by which the sum of the following amounts exceed 7,5% of the person’s taxable income before taking the AMTC into account:

• all fees paid by the person to a registered medical aid exceeding four times the amount of the MTC to which that person is entitled plus
• the qualifying medical expenses paid by the person

In other words, to calculate the AMTC rebate we can use the following table:

Taxpayer who is younger than 65	Taxpayer who is older than 65 / disabled / dependant is disable
Medical aid contributions during a tax year	Medical aid contributions during a tax year
Minus: MTC rebate x 4	Minus: MTC rebate x 3
= A	=A
Plus: Qualifying medical expenses	Plus: qualifying medical expenses
Minus: 7.5% of taxable Income
= B	= B
Rebate = B x 25%	Rebate = B x 33,3%

This sounds rather complicated, but do not be too worried about the formulas, as eFiling does the calculations for you as long as you have kept record of your qualifying medical expenses. The most important thing to know are the requirements for qualifying medical expenses, and to keep proper records so that you can claim the AMTC rebate in respect of qualifying medical expenses.

For a complete guide on claiming deductions for medical expenses, you can access the SARS guide by clicking here.