Tax Relief Benefits for Working Mothers in Singapore
Recently a friend who just became a mother asked me what are the tax relief benefits for working mothers in Singapore. I found it interesting, so I share my study here. For a general view on individual tax relief items, I had an introduction in article Guidelines on Tax Relief Items in Tax Filing. Other than tax relief items which are common for every tax resident (such as Qualifying Child Relief and Parent Relief), there are three special tax relief items for working mothers.
1. Working Mother’s Child Relief (WMCR)
In summary, if a child is a Singapore Citizen, part of the working mother’s earned income can enjoy tax relief. This relief is on top of Qualifying Child Relief (QCR). To qualify for this relief, the child must meet the same criteria as Qualifying Child Relief, those are: below 16 years old or studying full-time; and does not have an annual income exceeding $4,000. If there are more than one child, the percentage of the working mother’s earned income that can enjoy tax relief from each child is: 15% for the first child, 20% for the second child, and 25% for the third child and beyond. The tax relief for every child can be added up together but will be capped at 100%. For the same child, the total tax relief from Qualifying Child Relief and Working Mother’s Child Relief is capped at $50,000. The working mother also has a same cap on total personal tax relief as other tax residents, which is $80,000 per year.
2. Grandparent Caregiver Relief (GCR)
In summary, if a child is a Singapore Citizen and is taken care of by a grandparent who is living in Singapore, the working mother can enjoy a tax relief of $3,000 per year. “Living in Singapore” means the grandparent stays in Singapore for at least 8 months in a year. To enjoy this benefit, the child needs to be 12 years old or below, and the grandparent should not be working or carrying on any trade, business, profession, or vocation. If there are two grandparents taking care of the child together, the tax relief is still $3,000.
3. Foreign Maid Levy (FML) Relief
In summary, if there is a foreign maid being hired at home, a working married woman or mother can enjoy a tax relief of twice the foreign domestic worker levy paid in the year. Actually this relief does not limit to working mothers. A working married woman even doesn’t have a child, if she stays with her husband or the husband is not a tax resident in Singapore, she can enjoy this relief; If a working mother enjoys Qualifying Child Relief, she can also enjoy this relief regardless whether she stays with her husband.
The example below demonstrates how much tax saving a working mother can enjoy under these three special tax relief items.
Ms Zhang is a Singapore Citizen, working as a manager in a local bank. She is married with two children, both Singapore Citizens. In 2018, one child was 14 years old, and the other child was 10 years old. Ms Zhang’s mother is retired and taking care of the two kids for her. Ms Zhang also hired one foreign maid. The foreign domestic worker levy paid in 2018 was $3,180. In 2018, Ms Zhang’s total earned income is $100,000. Before calculating the special tax relief items for working mothers, Ms Zhang’s taxable income in 2018 is $80,000, and she needs to pay a tax of $3,350. We can calculate the special tax relief items for working mothers as follows:
(1) Ms Zhang’s two children meet the criteria for Working Mother’s Child Relief. The 14-year-old child can help her reduce taxable income of $100,000 x 15% = $15,000. The 10-year-old child can help her reduce taxable income of $100,000 x 20% = $20,000. The total reduction in taxable income is $35,000 under this relief.
(2) Ms Zhang’s mother and 10-year-old child meet the criteria for Grandparent Caregiver Relief. Ms Zhang can enjoy $3,000 tax relief under this item.
(3) Ms Zhang hired a maid and meets the criteria for Foreign Maid Levy (FML) Relief. She can enjoy $3,180 x 2 = $6,360 tax relief under this item.
To sum up (1) (2) and (3), Ms Zhang can enjoy a total deduction on her taxable income of $35,000 + $3,000 + $6,360 = $44,360 under the three special tax relief items for working mothers. After the deduction, Ms Zhang’s taxable income in 2018 is reduced from $80,000 to $35,640. Now she only needs to pay a tax of $397.40, which is $2,952.60 lower than the amount before the deduction.
From this case study on tax policies, we can tell that Singapore Government strongly encourage mothers to go back to the workforce.