Young next-of-kin refers to family members that are below the age of 55.
We'll do the 'next-of-kin above age 55' next time.
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Who Qualifies As Next-Of-Kin?
- Spouse
- Siblings
- Parents
- Parents-in-law
- Grandparents
- Grandparents-in-law
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Benefits of Topping Up
1. Tax Incentive
If you top up your next-of-kin's CPF accounts using cash, you get up to $7,000 per calendar year of tax deduction.
2. Earn More Interest
Topping up to your next-of-kin's CPF allows them to build up their retirement savings, and it will earn interest of up to 6%.
Criteria
There is a list of criteria to fulfil before your cash top-up to your next-of-kin qualifies for the tax deduction.
1. For All Next-Of-Kin Below Age 55
To recipients age below 55, you only get the tax deduction for up to the current Full Retirement Sum (FRS).
FRS - SA Savings - SA monies withdrawn under CPFIS*
*CPFIS: CPF Investment Scheme
Example:
The current CPF FRS is $181,000
Your mother's CPF SA currently has $150,000 and had previously withdrawn $30,000 for CPFIS.
So her "Total SA Savings" is $180,000.
If you top-up $7,000 cash to her CPF SA, only $1,000 will be eligible for the tax deduction.
Any additional amount ($6,000) you top-up will not be eligible for the tax deduction.
2. In Addition For Spouse/Siblings
To qualify for the tax relief for spouse or siblings top-up, in addition to the criteria above, they must also meet one of the following criteria:
- Income (e.g. salary or tax-exempt income such as bank interest, dividends and pension) not exceeding $4,000 in the year preceding the year of top-up*; or
- Handicapped**
* "Income" of a person would include income from all sources, such as tax-exempt income (e.g. bank interest, dividend and pension) and foreign-sourced income remitted into Singapore. Hence investment income/rental income/directorship income etc, are considered to be the income of a person.
** A handicapped person is one who has been incapacitated mentally or physically. Some examples are visual-impairment, loss of hearing, loss of limb and dementia.
Recommended Read: Why You Should Max Your CPF Retirement Sum Early
Any Additional Things to Note?
One More Thing...
There is a cap on maximum tax deduction one can receive in a given year.
The personal income tax relief cap is currently $80,000.
Meaning you won't get any additional tax deduction for each dollar you top-up to their CPF accounts if you hit the tax deduction cap of $80,000 before the top-up.
Conclusion
Topping up next-of-kin's CPF for tax reduction is a lot of work.
Need to make sure they have not met FRS.
Need to make sure they meet the income criteria.
Need to make sure I have not hit the cap for tax relief.
So view the top-up as helping your next-of-kin hit their retirement goals.
The tax deduction is just icing on the cake; additional benefits.
Not the main point.
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