Medical scheme tax credits, explained

Medical tax relief in South Africa comes as tax credits, not deductions. A credit reduces the tax you owe rand-for-rand, which is more valuable than a deduction (which only reduces taxable income). There are two parts.

1. The Medical Scheme Fees Tax Credit (MTC)

This is a fixed monthly credit for belonging to a registered medical scheme. It's a set amount for the main member, the same amount for the first dependant, and a (smaller) set amount for each additional dependant. It does not depend on how much your contributions cost, only on how many people are covered.

The MTC is built into your PAYE: if your employer deducts medical scheme contributions, they typically apply the MTC to your monthly PAYE automatically.

2. The Additional Medical Expenses Tax Credit (AMTC)

This second credit covers out-of-pocket medical costs and contributions above a threshold. How it's calculated depends on your circumstances:

• 65 and older, or a person with a disability (or a disabled dependant): a more generous formula; a larger share of qualifying expenses and excess contributions converts to a credit.
• Under 65: only the portion of qualifying expenses plus excess contributions that exceeds a percentage of your taxable income converts to a credit. For many under-65 taxpayers without large medical bills, the AMTC works out to nil.

What counts

Qualifying medical expenses generally include amounts actually paid that the scheme didn't cover, and certain disability-related expenses. Keep records and your medical scheme tax certificate; SARS can ask for them.

Why it matters at assessment

Because the AMTC is only finalised once your full year's income and expenses are known, it's a common source of refunds on assessment for taxpayers with significant out-of-pocket costs, relief that monthly PAYE didn't account for.

TaxRationale applies both credits using the current SARS values and the right formula for your age and disability status, and shows the medical credit as its own line in your computation.