Taxpayers are entitled to two medical credits:

1. A credit on contributions made to your medical aid; and
2. A credit on additional medical expenses you paid that weren’t covered by your medical aid. This is called qualifying out-of-pocket medical expenses.

1. Medical Scheme Fees Tax Credit (MTC)

If you’re a medical aid member, the South African Revenue Service (SARS) grants you a monthly tax credit (MTC). The MTC is calculated for every month of your membership during the relevant tax year. The credits applicable to the 2023/24 tax year are available on the SARS website here.

Monthly Tax Credit – 2021 Tax Year (1 March 2020 – 28 February 2021)

• R310 p/month for the taxpayer who paid the medical scheme contributions (you get this credit even if your employer pays the contributions on your behalf);
• R310 p/month for one OR R620 p/month for two dependants; and
• R209 p/month for each additional dependant

2. Additional Medical Expense Tax Credit (AMTC)

The AMTC is a rebate that reduces the tax payable by the taxpayer. It’s mostly calculated against qualifying out-of-pocket medical expenses paid by you or any dependant. The credit is handled as a rebate to reduce your normal taxation. 

Note the following: 

• The AMTC is additional to the MTC.
• If you aren’t a medical aid member, you are still able to claim any medical expenses that you incur.

Keep all the slips and invoices as proof. You can ask your pharmacist for an account statement of all your medical expenses.   

Tip: Process all your claims even if you know it will be rejected. When filing your tax return, a statement of all your rejected claims can be compiled, effectively proving your out-of-pocket expenses. 

Calculation of AMTC

All taxpayers younger than 65 years and who aren’t disabled can claim 25% of:

• The amount paid to the medical scheme that exceeds four times the amount of the medical tax credit you are entitled to; plus
• The amount of qualifying medical expenses paid out-of-pocket exceeding 7.5% of taxable income.

Example:

Jane pays her family’s medical expenses. For the 2021 tax year, we can assume the following:

Jane’s taxable income: R420,000

Medical contributions paid to the medical aid: R66,000

Jane has been a member for 12 months.

Qualifying out-of-pocket medical expenses paid: R40,000

Jane is married and has three children (four dependants in total).

Calculation spreadsheet

If you are 65 years or older, or you or one of your dependants has a disability, you can claim:

• 33.3% of the amount paid to your medical aid that exceeds four times the amount of medical tax credits you are entitled to, plus
• 33.3% of qualifying medical expenses paid out-of-pocket.

Please note – during eFiling the above mentioned calculation should be automated.

Being tax efficient is an important part of great financial management. In this blog, a group of South African tax experts share their tips and explanations on tax issues. Learn everything you need to know about tax, from deductions you never knew about to retirement savings and capital gains. The first Tuesday of every month is Tax Tuesday. Don’t miss it!