A practical way to improve your tax efficiency is by understanding how medical contributions and out-of-pocket expenses are to be claimed.
When it comes to filing your income tax return, medical expenses often raise more questions than answers. Many individuals aren’t aware that certain medical aid contributions and out-of-pocket expenses could reduce their tax liability – if claimed correctly under Section 6A and Section 6B of the Income Tax Act.
The Basics: Section 6A
Section 6A focuses on the Medical Scheme Fees Tax Credit (MTC). This is a fixed monthly tax credit that reduces your tax payable – not a deduction from income (in other words, it directly lowers the amount of tax you owe, rather than just reducing the income that gets taxed). It applies to contributions paid to a registered medical scheme in respect of:
- The taxpayer (main member)
- Their spouse
- Dependents covered under the same plan
The credit amount is adjusted annually by SARS, and while it might seem modest at first glance, it adds up over a year – especially for families with multiple dependents.
More Than Medical Aid: What Section 6B Can Do for you
Section 6B deals with the Additional Medical Expenses Tax Credit (AMTC). This credit considers qualifying medical expenses that you’ve paid out-of-pocket – typically those not reimbursed by your medical scheme.
Examples of potentially qualifying expenses include:
- Certain prescribed chronic or special medications
- Specialist consultations not fully covered
- Assistive devices like wheelchairs, hearing aids, or spectacles
- Home nursing or frail care (under specific conditions)
However, the Section 6B credit is not a simple “claim-everything” calculation. SARS applies different formulas based on age and disability status:
- Under 65 (no disability): The deduction is based on a formula that takes your taxable income, medical aid contributions and qualifying medical expenses into account. The higher your taxable income, the lower the potential Section 6B credit.
- 65 years or older: You may claim 33.3% of the sum of your qualifying out-of-pocket medical expenses and medical scheme contributions that exceed three times your Section 6A credit.
- Taxpayer or dependent with a disability (any age): You may claim 33.3% of the sum of qualifying out-of-pocket expenses and contributions exceeding three times your Section 6A credit.
These formulas can get tricky – which is where professional guidance makes all the difference.
Keep Your Supporting Documentation
When claiming under Section 6B, thorough record-keeping is essential. You’ll need supporting documents such as:
- Medical aid tax certificates
- Detailed medical invoices or receipts
- Proof of payment (EFTs, bank statements, etc.)
Section 6B claims are checked more carefully by SARS, which can increase your chances of being audited. Having your paperwork ready ensures the process is smooth and stress-free.
Why It Matters
Many taxpayers miss out on valuable credits simply because they’re unsure how these two sections interact – or what documentation SARS will accept as proof. Every person’s situation is unique and knowing the rules can prevent overpaying tax and protect you in the event of an audit.
If you’re unsure whether your medical expenses qualify under Section 6A or 6B – or if your record-keeping is audit-ready – we at waucomply can assist. Please contact Lileya Hanauer at lhanauer@wauko.com or 021 819 7811.
