Many South Africans are unaware that they qualify for a medical tax credit if they belong to a medical scheme.

We have always had a tax benefit for contributions to a medical scheme. In 2012, SARS changed this benefit from a tax deduction to a medical scheme fee tax credit.

This was to level the playing field, as higher-income earners, who could afford higher premiums, were receiving a greater benefit from the tax deduction. A medical tax credit is a flat rand amount that is paid to every taxpayer who is a member of a medical scheme.

For the current tax year, a main member can claim back R347 per month for the first two members and R234 for additional members. For example, if you are the main member and you have a spouse and two children, you would receive a credit of R1 162 per month, which equates to R13 944 per year.

You may not be aware of this credit if your employer is already adjusting your tax deduction to account for the medical tax credit. This happens if you belong to a medical scheme via your employer. Because your employer is deducting the medical scheme premium from your salary or wages, they would have adjusted your monthly PAYE tax accordingly.

What this does mean, however, is that you are paying less tax each month than you would be if you did not belong to a medical scheme. The medical tax credit is effectively subsidising your medical scheme contribution.

If you contribute to a medical scheme independently from your employer, in other words you are paying the premium with your after-tax salary, you will receive the tax credit on assessment when you complete your tax return.

Ensure the medical tax credit is applied on your tax return

SARS receives all the relevant information from the various medical schemes, and in most cases, the medical tax credit should already be “pre-populated” in your tax return. However, it is important to double check your tax return to ensure that it reflects the credit.

If you are receiving this credit, rather than spending the money as a “windfall”, put the funds into a savings account that you can use to help cover your medical expenses during the year.

Over and above the medical tax credit you get for the premium you are paying to your medical scheme, you may also be able to claim a tax credit for certain additional qualifying medical expenses.

This probably won’t apply if you are a healthy person under the age of 65, as your additional medical expenses need to be very high before you will be able to make a claim. However, for people with a disability, or those over the age of 65, there could be a tax advantage.

People under the age of 65 without a disability can claim 25% of qualifying medical expenses that exceed 7.5% of their taxable income. To illustrate, for someone with an annual taxable income of R300 000, their qualifying medical expenses would need to come to more than R22 500 per annum.

Qualifying expenses includes 25% of qualifying “out-of-pocket” expenses (not paid by your medical scheme) and 25% of medical scheme contributions, less four times the medical tax credit (per member).

In other words, your total medical scheme contribution would need to exceed four times the tax credit (R16 656 for a main member) and then you could only claim 25% of the amount above that threshold – as long as your total medical expenses exceed 7.5% of your taxable income.

For people with a disability, or those over the age of 65, there is no limit relative to their taxable income, so the threshold is lower. If you fall into this category, you can claim 33.3% of qualifying out-of-pocket medical expenses (not paid by your medical scheme).

You could also claim 33.3% of total contributions to the medical scheme less three times the medical tax credit. In this case the medical scheme contribution would need to exceed three times the medical tax credit (R12 492 for a main member).

Medical expenses can be claimed if you are not a member of a medical scheme. But if you are a member of a scheme, make sure that all of your medical expenses are put through your medical scheme so that they are officially recorded.

Even if the scheme rejects your claim and does not make payment, the expense will still be shown on your annual claims statement, making it easier to claim the non-payment as a tax deduction.

The only warning, however, is that SARS is double checking all paperwork and will most likely ask you for all the invoices as well. So make sure you keep all information relating to your medical expenses.

If you have high medical bills, it is worth speaking to a tax expert to ensure you understand the potential tax benefits.