PSA: how to save a few thousand bucks¹ in taxes, 2025 edition. With bonus new sections!

You have 4 less than weeks left - don't miss the boat.

For the 7th year running, I'm updating and re-releasing my annual guide on how to save on personal income tax. And this is not just a copy and paste job - every year, I spend hours updating the guide to:
(a) reflect changes in the rules;
(b) update the new applicable monetary limits for the various schemes; and
(c) expand on the rationale for various suggestions.

For those who have read previous iterations of this guide, I suggest that this is still worth a read, because I have added significant chunks of additional content. In particular, I have a new bonus section: ideas on how to use your bonus.²

This guide is especially relevant for the self-employed amongst us (which likely includes but is not limited to business owners, sole proprietors, law firm partners / consultants, real estate agents, financial advisors, artists, and artistes).³

I do not consider myself a tax law specialist, so comments, suggestions, or even criticisms are welcome.

—

A. Introduction

Every year, I update and re-release a guide on how to save on personal income tax. This started some years ago, when I tried to figure out how I could reduce my tax liabilities and found, to my frustration, that the information was scattered all over the place.

I set out in this guide 6 specific steps that you can take, including calculations as to the amount of tax you can potentially save. Each of these steps stack with one another, for more tax savings.

In this year's edition, I have added a new 7th step. It does not stack with the 6 earlier steps, but will be relevant to some folks who have managed to build up significant CPF savings.

All calculations in this guide are on the assumptions that:

(a) you are Singaporean / PR - if you are not, your contributions limits for some of these schemes may differ, and some of these schemes may not be open to you; and

(b) you earn $160,000 per year¹ - if you earn more, following this guide will save you even more tax. Upon consideration, I have decided not to change this figure from the 2024 guide.

And for those of you who have read previous iterations, and are wondering whether a re-read is worth your time:

(a) this year, on top of step 7 mentioned above, I'm also adding a bonus new section: suggestions for how to utilise your year-end bonus;² and

(b) I'd like to think that this is the sort of material that is worth refreshing your knowledge on once a year; and

(c) I tightened up some language, corrected some errors, and added / updated some jokes.³

B. The steps

I. Open a Supplementary Retirement Scheme (SRS) account and transfer in $15,300.⁴

Tax saved: $2,295 (15% of $15,300).⁵

Downside: the money is stuck in your SRS account.

But don't just let it sit there. Invest it in something long-term. Why? Because you can start to withdraw it penalty-free from the age of 63 (the present retirement age). You pay taxes on 50% of the amount you withdraw, but if you are retired with no chargeable income, you pay less or no taxes on the withdrawn amount.⁶

I cannot emphasise enough the importance of actually investing the funds in your SRS account. The interest rates for SRS accounts are negligible (0.05% per annum). But the idea is to channel the money in your SRS account towards long-term investments⁷ that you do not intend to cash out until retirement. Even if the investment returns are only middling, remember that you are saving 15% in taxes.

That being said, SRS contributions may not be for everyone, especially for those who do not pay significant amounts of personal income tax. Jun Yuan Yong of The Business Times explains in an article from February 2024 [https://www.businesstimes.com.sg/opinion-features/srs-contributions-are-great-tax-savings-may-not-be-everyone]. His article also includes suggestions on what SRS funds can be invested in.

Finally, some of you may not be convinced of the benefits of SRS contributions. That's perfectly fine. But even if you fall into this category, can I implore you to open an SRS account anyway, then transfer $1 in. That's because the earliest date from which you can start to make penalty-free withdrawals is pegged to the retirement age at the time when you make your first SRS contribution (and not when you first open an SRS account). What this means is if you had made / make your first SRS contribution:

(a) before 1 July 2022, you would be able to start making penalty-free withdrawals from the age of 62 (the retirement age at that time, before it was increased to 63 on 1 July 2022);⁸

(b) between 1 July 2022 and 30 June 2026, you would be able to start making penalty-free withdrawals from the age of 63 (the current retirement age);

(c) between 1 July 2026 and around 2030, you would be able to start making penalty-free withdrawals from the age of 64 (the retirement age from 1 July 2026 onwards); or

(d) around 2030,⁹ then you would be able to start making penalty-free withdrawals from the age of 65 (the retirement age from 2030 onwards).

Now, I don't know about you, but I change my mind all the time.¹⁰ You may not see the point of SRS contributions now. You may never see the point. But on the off-chance that one day, you do decide to start making SRS contributions, wouldn't you appreciate having the option to starting penalty-free withdrawals at the age of 63 - as opposed to 64, 65, or even older - and potentially bring forward the start of your (semi-)retirement? And you unlock this option for the low, low, price of $1.¹¹ If you ask me, making a $1 SRS contribution now is a no-brainer.

II. Transfer $8,000 to your CPF Special Account (SA).¹²

Tax saved: $1,200 (15% of $8,000).¹³

Downside: the money is stuck in your CPF SA.

But you'll get 4% interest per annum.¹⁴ And the money in your CPF SA will be transferred to your Retirement Account when you hit 55, and will go towards funding your CPF payouts from the age of 65. The more you have in your CPF SA, the more you'll have in your Retirement Account, and the more your monthly CPF payouts.

Now, the common response I get is, "but won't my money be stuck with CPF forever?"

I get it. I know that many folks are adverse to voluntary CPF top-ups. I myself used to think that there was no point in making voluntary CPF top-ups. I saw it as a black hole that I would never be able to recover funds from.

However, my perspective shifted after I had kids. And that's because you can nominate your children, or anyone else for that matter, to receive your CPF savings when you pass on. This means, for example, that you can plan to leave less cash to your descendants, in the knowledge that they will be able to receive cash from your CPF nomination. More on how it works here: https://khelvinxu.medium.com/if-i-voluntarily-top-up-my-cpf-wont-my-money-be-stuck-in-there-forever-bb6e790d2d74. More on CPF nomination here: https://khelvinxu.medium.com/cpf-nomination-a-quick-primer-512d05009b5a.¹⁵

So, in real terms, suppose I religiously top up my CPF throughout the course of my working life. When I pass on, let's say I have $100,000 left in my CPF accounts (after deducting the amounts I had collected via the monthly CPF payouts). My nominee(s) will get $100,000 in cash - it doesn't go to their CPF account(s). In other words, the unused CPF top-ups don't go to waste, or even into the Government's coffers - someone of my choice benefits from them.

And even if you don't plan to have kids, you may well have younger sibling(s), niece(s), nephew(s), friend(s), or even a favoured charity. If you would like to leave something to any of them when you pass on, consider this seriously.

Note that in some previous versions of this guide, I suggested that:

(a) if the amount in your CPF Ordinary Account (OA) + CPF SA exceeds the "Full Retirement Sum", you can withdraw the difference;

(b) if you are confident that you will eventually be able to exceed the Full Retirement Sum, then you will eventually be able to collect the excess, in the form of cold, hard, tax-free cash; and

(c) this is therefore a further incentive to top up your CPF SA via this scheme.

However, CPF has clarified that top-ups under this scheme cannot be withdrawn.¹⁶ As such, that logic does not apply.

Also, a final caveat: this option will not be open to you if your CPF SA already contains a sum that is equivalent to the current Full Retirement Sum (which is $213,000 as of 2025). If you have been making regular CPF contributions, or have been transferring CPF funds from your CPF OA to your CPF SA,¹⁷ it is very possible to hit the Full Retirement Sum in your 40s or even earlier.¹⁸ If you are fortunate enough to be in this situation, the bad news is that you cannot enjoy tax relief by making a contribution to your CPF SA. But the good news is that I have a new Section B(VII) below specially for you.

III. Transfer $8,000 to your parent's / spouse's SA / Retirement Account.¹⁹

Tax saved: $1,200 (15% of $8,000).²⁰

Downside: you're giving the money away to someone else, and it goes to their CPF account (as opposed to being cash that they can spend). This isn't for everyone. Please have a serious discussion with the recipient beforehand.

If you intend to make a transfer to your spouse, you only get tax relief if your spouse is earning $8,000 or less for the year.²¹ So if you're in a dual-income household, you probably can't save on taxes by making a transfer to your spouse.

IV. Make a voluntary CPF top-up.²²

This is tricky and will depend on whether you are an employee or self-employed.

If you're an employee, the maximum of $37,740 is already going into your CPF accounts every year, since your income of $160,000 exceeds the CPF annual salary ceiling.²³ So don't bother with the rest of this section.

If you're self-employed (e.g. business owners, sole proprietors, law firm partners / consultants, real estate agents, financial advisors), you have compulsory MediSave contributions of $7,992 (if your age is between 35 and 44, inclusive).²⁴ So you can theoretically top up a further $29,748 ($37,740 less $7,992). But don't get too excited yet. You would not save $4,462.20²⁵ in taxes, because with the deductions of $15,300 + $8,000 + $8,000 = $31,300 at Sections B(I) - (III) above, if you top up so much, you're going to get bumped down into the preceding tax bracket of 11.5%.

Further, if you think you are going to need liquid funds in the near future, you may want to limit your voluntary CPF top-up amount. Once the funds are transferred to your CPF account, they're locked up (but see Section B(II) above for a discussion on what this really means).

However, voluntary CPF top-ups are still worth considering as a tax saving tool if:

(a) you agree with the point I made at Section B(II) above - that CPF contributions are not wasted;

(b) you are fortunate enough to be earning, say, $230,000 or more per year. If you think that you should be saving at least 20% of your income, then the maximum of $37,740 which you can voluntarily contribute to your CPF accounts comes up to 16.41% - well under 20% - and making this maximum voluntary CPF contribution will save you $5,354.64 or more in taxes (18% of $29,748);²⁶ and/or

(c) you are able and intend to use part of your CPF contributions towards a property purchase. The portion of your CPF contribution that goes into your CPF OA can be used towards your down payment, monthly mortgage, or both. For folks aged 36 - 45 who contribute the maximum of $37,740 to their CPF OA accounts, CPF will automatically allocate $21,425 into your CPF OA,²⁷ some or all which can then be (immediately) withdrawn to pay for property. Assuming you are able to withdraw the entirety of your CPF OA towards your property purchase,²⁸ only $16,315 (out of the CPF contribution of $37,740) ends up being locked up in your CPF OA and MediSave Account.

Finally, as to timing, doing voluntary CPF top-ups at the beginning of the year allows you to maximise your interest returns (calculated based on the CPF interest rate). If you have yet to make any CPF contributions this year, consider making a contribution by December 2025 (for tax deductions for YA 2025) and in January 2026 (for tax deductions for YA 2026). Some people spend their year-end bonuses on timepieces or art. I personally try to keep a chunk to do a big top-up in January. To paraphrase one of my friends, financial prudence is very sexy. I elaborate on this at Section C(I) below.

V. Claim Parent Relief as one of your tax reliefs.²⁹

Tax saved: $825 to $4,200 (15% of $5,500 to $28,000).³⁰

Downside: none, assuming that you would have supported your parent(s) anyway regardless of whether it entitles you to any tax relief.

Unlike the other steps in this guide, this step requires you to actively add a tax relief item when you file your Income Tax Return. It also requires you to coordinate with your sibling(s) (if you have any) on how this tax relief should be shared.

Please don't sleep on this. It was only when preparing the 2024 guide that I realised that I might have overlooked this for my 2024 tax filing. This was especially galling considering that Ernest See had already highlighted this scheme in a comment, long before the tax filing season.³¹ If you're concerned about missing out on this, set a calendar reminder for every May, since the personal income tax filing deadline every year is 15 April (for paper filing) or 18 April (for e-filing).

VI. Donate to Institution(s) of A Public Character (IPCs).³²

Donating to an IPC allows you to claim 250% tax deductions. For example, if you donate $5,000 to Methodist Welfare Services or Pro Bono SG, you can claim $12,500 in tax relief.

Further, donations to some charities can be matched dollar-to-dollar under the Tote Board's Enhanced Fund Raising Programme.³³ So if you make a $5,000 donation (for example), the charity ends up receiving $10,000. And what makes it even better is that thanks to the tax relief, you don't wind up with $5,000 less in spending money. It'll be closer to $2,000 - $2,750, depending on your tax bracket (see the illustration below).

So in real terms, you pay $2,750 out of your own pocket, but the charity gets $10,000. Talk about bang for buck!

Note however that it is not possible to donate X and save Y in taxes, where Y is more than or equal to X. Suppose your chargeable income is $1,112,500, which means that you pay the maximum of 24% tax on your chargeable income exceeding $1 million. Consider 2 scenarios:

(a) you donate $5,000. You pay taxes of $24,000 on your chargeable income exceeding $1 million [($112,500 - 12,500) x 24%]. So you have $29,000 less in spending money ($5000 plus $24,000);

(b) you do not donate $5,000. You pay taxes of $27,000 on your chargeable income exceeding $1 million ($112,500 x 24%). So you have $27,000 less in spending money.

So in the scenario where you donated $5,000, you end up with $2,000 less spending money. As such, don't expect to wind up with more money in your pocket as a result of your donations. But consider this anyway if:

(a) you intend to make a charitable donation anyway, but have not yet decided where to channel your donation towards - if so, and you are able to identify an IPC that supports what you consider to be a worthy cause, you might as well enjoy some tax savings; or

(b) you would like a bit more control over the causes which your funds go towards, as opposed to leaving it entirely to the Government to decide where to spend your tax dollars.

Tax deductions under this section are not subject to, and do not add to, the personal income tax relief cap of $80,000.³⁴

VII. Transfer up to $8,000 to your CPF Medisave Account (MA).³⁵

Tax saved: $1,200 (15% of $8,000).³⁶ But it might be less.

Downside: the money is stuck in your CPF MA. But maybe not.

Ok, this part is complicated and I am still struggling with it, so bear with me.

First of all, you don't need to grapple with this if you have yet to hit the Full Retirement Sum in your CPF SA.

But if you have hit the Full Retirement Sum in your CPF SA - and good for you! - you will no longer be allowed to transfer up to $8,000 to your CPF SA, as discussed at Section B(II) above.

However, instead of transferring this sum into your CPF SA, you can top up to $8,000 into your MA instead, and enjoy the same tax relief.³⁷

But there are a couple of catches:

(a) first, the $8,000 limit is shared across CPF SA top-ups and CPF MA top-ups. So you can't top up $8,000 into your CPF SA, another $8,000 into your CPF MA, and enjoy tax relief of $16,000. Which is why I say that for those of us who have not hit the Full Retirement Sum, it might be easier to just transfer $8,000 into our CPF SA and call it a day;³⁸ and

(b) second, the amount in your CPF MA is capped at the Basic Healthcare Sum, which is $75,500 in 2025. So for example, if I presently have $71,500 in my CPF MA, I cannot top up $8,000 in order to enjoy tax relief of $8,000. I can only top of $4,000 (i.e. $75,500 minus $71,500) and enjoy tax relief of $4,000.

And this is more a tip for 2026, but as Louis Neo pointed out, if you have already hit your Basic Healthcare Sum for 2025 in your CPF MA:

(a) in January 2026, the Basic Healthcare Sum will increase. We don't know yet how much it will increase by, but from 2024 to 2025, the Basic Healthcare Sum increased from $71,500 to $75,500;³⁹

(b) you can, in January 2026, top up the difference between the balance in your CPF MA and the Basic Healthcare Sum; and

(c) if you are an employee, you should do so quickly, because when your employer makes CPF contributions for January 2026, part of those contributions will flow into your CPF MA and reduce the amount that you can top up for tax relief purposes.

Finally, why do I say that this money might not be stuck in your CPF MA? That's because:

(a) suppose you top up your CPF MA, such that the amount in your CPF MA is now the 2026 Basic Healthcare Sum;

(b) as a self-employed person, you then do a voluntary CPF top-up (see Section B(IV) above). Part of this CPF top-up will be apportioned to your CPF MA;

(c) however, if you have already reached the Basic Healthcare Sum in your CPF MA, the excess will flow into your CPF SA;

(d) if you have already reached the Full Retirement Sum in your CPF SA, the excess outflow from your CPF MA will flow from your CPF SA into your CPF OA;⁴⁰ and

(e) here's where the magic is - you can use the funds in your CPF OA to pay your monthly housing loan installments.

So the conditions are quite specific. But what this means, in real terms, is that it's possible to find yourself a situation where you can enjoy tax relief by putting aside a sum of money that eventually goes towards paying your mortgage anyway. This is probably as close as it gets to no-strings-attached tax relief.

Confused? I know! It's hard! DM me if you (a) are self-employed; (b) are close to or have hit the Full Retirement Sum and Basic Healthcare Sum in your CPF SA / MA respectively; (c) like to save on taxes; and (d) would like to discuss.

C. How to utilise your bonus

This section is new to the 2025 edition of this guide.

Look, if you want to blow your bonus on booze,⁴¹ illicit substances,⁴² or companions of negotiable affection,⁴³ you do you. I'm not here to be the moral police.⁴⁴

But - consistent with what I mentioned above about the merits of financial prudence - I offer some min-max suggestions on what you can do with a chunk of cash in December 2025 / January 2026.

I. Do a voluntary CPF top-up on 31 January 2026.

I alluded to this at the end of Section B(IV) above, but I think it bears repeating.

If you are sold on the idea of using voluntary CPF top-ups to reduce your tax bill for income earned in 2026, then doing a CPF contribution at the beginning of 2026 (as opposed to at the end) will allow you to (a) save on the taxes you eventually pay on your 2026 income; and (b) generate more interest income on the same sum of money throughout the course of 2026.

Your voluntary CPF top-up will be apportioned between your CPF OA / SA / MA based on a certain age-based formula.⁴⁵ The chunk that goes into your CPF OA generates 2.5% in interest, whereas the chunk that goes into your CPF SA / MA generates 4% in interest. In the current interest rate environment, this beats most, if not all, high-yield savings accounts, fixed deposits, and even money market funds.

Of course, you might prefer to:

(a) take the funds which you have designated for your 2026 voluntary CPF top-ups;

(b) invest these funds in other products in January 2026;

(c) realise your investment in mid-December 2026; then

(d) do a voluntary CPF top-up in end-December 2026 using these funds.

But you would do this only if you believe that you can beat the blended CPF interest rate. And, well, I don't think I can.

A caveat. If you are not sure, at the beginning of the year, what your total income will be for the entire year, and may want to calibrate your voluntary CPF top-up accordingly, you may want to hold off. But even so, I think there is no harm in figuring out what is the baseline amount you will want to voluntarily top-up into your CPF account regardless of your income for the year, and putting that sum in first. You can always top up more later in the year.

Finally, why 31 January 2026, instead of 1 January 2026? That's because of the way CPF calculates interest:⁴⁶

(a) interest is calculated monthly;

(b) the interest for that month is calculated based on the lowest figure in that CPF account for that month;

(c) so suppose, due to various withdrawals and top-ups, the amount in your CPF OA has fluctuated in the course of a month. You started out with $30,000 at the beginning of the month, it went down to $25,000 because of your mortgage payment, but you then made a voluntary CPF top-up, and the amount went up to $35,000 at the end of the month. CPF will calculate your interest returns for that month based on a principal of $25,000, since that is the lowest figure that your CPF OA dropped to in the course of the month;

(d) in other words, you don't get more interest from CPF if you do a voluntary CPF top-up on 1 January 2026 as opposed to 31 January 2026;

(e) therefore, you might as well leave that earmarked sum in a high-yield savings account / money market fund for most of January 2026.⁴⁷ Just don't forget to actually do the voluntary CPF top-up by 31 January 2026! Set a calendar reminder or something.

II. Make a voluntary housing refund into your CPF OA.⁴⁸

This is not the same as what I have discussed at Section C(I) above, and won't apply to everyone. But if you:

(a) have used money from your CPF OA towards housing;

(b) keep your emergency fund in the form of cash / money market funds; and

(c) would like at least part of your emergency fund to generate 2.5% returns with minimal risk;

then read on.

Suppose you have used $100,000 from your CPF OA towards housing. You are allowed to, at any time, refund up to $100,000 back into your CPF OA. So you can consider taking the part of your bonus that you would have set aside as part of your emergency fund, and using that sum to do a voluntary housing refund.

But some of you are now saying, hold on. Isn't money in your CPF OA stuck there? Doesn't it defeat the purpose of having an emergency fund?

Well, there is one way you can draw money out of your CPF OA regularly...

...and that's to service your housing loan monthly installments.

So let's take a hypothetical situation. Suppose:

(a) your monthly expenditure is $9,000;

(b) you maintain an emergency fund that can cover 6 months' worth of expenditure, which works out to $54,000; and

(c) your monthly mortgage payment is $3,000.

You could:

(a) keep $54,000 in cash in a bank account; or

(b) keep $36,000 in cash in a bank account, and make a voluntary housing refund of $18,000.

In both scenarios, if you lose your job, you will be able to cover 6 months' expenditure while you find a new job. The only difference is that in scenario (b), you are generating 2.5% of interest on the sum of $18,000, which is probably more than you can presently expect from any high-yield savings account / money market fund.

III. Make a lump sum investment into a low-cost index fund.

Look, I'm not a finance person. Don't take financial advice from me, and I'm not giving out any.

But if you believe in the power of compounded returns over a long period of time, and are concerned about inflation eroding away your hard-earned savings, do consider looking into this. There's a world of literature out there on this.

And if you think that low-cost index funds are worth taking a stab at, history suggests that for most time periods, a single lump sum investment performs better than investing the same amount over a period of time.

But if you remain hesitant - what if the market drops literally the next day?!⁴⁹ - you could also invest half of the lump sum, and dollar-cost average the remaining sum over the next 6 or 12 months. Historically, you are likely to do better, compared to leaving the same lump sum in your bank account.

But I'm really out of my depth here so I'll just stop here.

IV. Make an SRS contribution, then do a lump sum investment into a low-cost index fund.

For the same reasons as those set out at Sections B(I) and C(III) above.

This piece is already long enough as it is, so I'm not going to repeat the analysis above.⁵⁰

D. Conclusion

Thank you for your contribution to nation building.

Edit: P.S. this is not legal advice, for general information only, all views my own, etc etc, you know the drill.