KUALA LUMPUR – Tax incentives and reliefs are something taxpayers eagerly anticipate from the federal government each time the annual budget is tabled. These reliefs help taxpayers save more on taxes, enabling them to allocate the savings for themselves and their families, particularly on education, healthcare, and first homes, which are priorities for young families.
As 2025 opens its curtains, Scoop highlights the tax reliefs set to be implemented this assessment year which will benefit Malaysian families.
1. Individual income tax relief
The government, through Budget 2025 passed in December 2024, will increase the individual income tax relief on premium payments for education and medical insurance to RM4,000.
The individual income tax relief for medical expenses, which is up to RM10,000, will also cover portions of medical payments made by taxpayers under insurance and takaful products for medical and health services with co-payment features.
The government has maintained tax relief for expenses related to serious illness for oneself, a spouse, or a child; fertility treatment for oneself or a spouse; vaccinations for oneself, a spouse, or a child (limited to RM1,000); and dental examination and treatment expenses for oneself, a spouse, or a child (limited to RM1,000).
These tax reliefs are provided to encourage the public to engage in improved health screening and treatment.
Additionally, tax relief will be expanded to cover full medical check-ups, mental health check-ups or consultations, self-test kits (such as Covid-19 and influenza test kits), self-testing medical devices (such as glucometers, pulse oximeters, blood pressure monitors, and thermometers), and fees for disease detection examinations (such as blood tests, ultrasounds, mammograms, and pap smears) conducted at clinics or hospitals.
For families with children under 18 who have learning disabilities like autism, ADHD, global developmental delay (GDD), intellectual disability, Down syndrome, and specific learning disabilities, tax relief limits will be increased from RM4,000 to RM6,000 for assessment, diagnosis, early intervention programmes, and continuous rehabilitation treatments.
Individual income tax relief of up to RM3,000 for nursery or kindergarten fees will be extended for three years, with the relief applicable from the 2025 to 2027 assessment years.
2. Tax relief for people with disabilities
Taxpayers from the disabled community will see their tax relief increased from RM6,000 to RM7,000 for 2025. Individual taxpayers with a disabled spouse will see their tax relief increase from RM5,000 to RM6,000.
Furthermore, individual taxpayers with unmarried disabled children will see their tax relief increased from RM6,000 to RM8,000.
3. Tax relief for first-home buyers
For taxpayers planning to purchase their first homes, RM7,000 per year in total individual income tax relief will be provided for interest payments on the first residential home loan for houses priced up to RM500,000.
RM5,000 per year in tax relief will be given to those purchasing their first homes priced above RM500,000 and up to RM750,000.
The Finance Ministry has specified that the relief applies only if the home is not used to generate income.
Additionally, the sales and purchase agreement must be executed between January 1 and December 31, 2027. The tax relief on interest payments is applicable for three consecutive assessment years, starting from the year the housing loan interest is first paid.
Two or more individuals can claim tax relief on the same home’s loan interest, based on their share of the interest payments.
However, while 2025 is expected to be a relieving year for Malaysian taxpayers due to the tax reliefs, it will also be a year of increased spending due to a broader scope for sales and services tax (SST) imposed by the government.
The scope of service tax will be progressively expanded to include new services, such as business-to-business (B2B) commercial service transactions, effective May 1, 2025.
Meanwhile, the sales tax rate for non-essential goods, such as imported premium items like avocados and salmon, will also be expanded, although basic food items consumed by the masses will be exempt.
As a result, Malaysian “foodies” from upper-middle and high-income groups who enjoy fine dining, sushi, and meals at high-end cafes will see an increase in spending on food that uses imported premium ingredients.
According to Prime Minister Datuk Seri Anwar Ibrahim, a portion of the revenue collected will be directed toward enhancing cash assistance for the rakyat, as well as improving the quality of education and healthcare services. – January 1, 2025