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Why topping up my CPF won't reduce my tax

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By Rena

It's going to be the end of the year, and there are many who are topping up their CPF to earn tax relief. For me, topping up my CPF will not reduce my tax in any way. So for me, I'm not going to top up this year. 

And the reason for that is simply because of this statement from IRAS:

A personal income tax relief cap of $80000 applies to the total amount of all tax reliefs claimed for each year of assessment.

So for individuals, note that your maximum amount of tax relief is capped at $80,000. Once you reach that sum, topping up your CPF will not help reduce your tax. 

I get a substantial tax relief from the working mom tax relief. The following is the tax relief for working moms:

  • 15% of earned income for 1st child
  • 20% of earned income for 2nd child
  • 25% of earned income for 3rd child and beyond
As these relief are cumulative (meaning if you have 2 children, your tax relief is 15% + 20% = 35%), they become quite significant. With 3 kids, I qualify for 60% of tax relief of my earned income. This forms the bulk of my tax relief.

Another bulk of relief will be from my compulsory CPF contribution. Without us doing anything, a portion of our salary goes to CPF. This contribution is known as the compulsory employee CPF contribution, and they are included as part of my tax relief. 

After adding in my CPF and working mother tax relief, I've exceeded the personal income tax relief of $80,000. I like that IRAS highlight this (I copied this from IRAS' website):


Well, part of my CPF contribution are taxed now OR you can look at it as I don't get the full 60%  working mom tax relief. Any way you look at it, topping up CPF in anyway will not reduce my tax. On a side note, this means based on current situation, I won't benefit from the additional tax relief for working mom if I have another kid. But honestly, whether I want more kids or not has nothing to do with tax, anyway.


Today's Christmas Eve! Have a Merry Christmas and a Happy New Year!









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