5 Income Tax Essentials For Young Adults In Singapore

Understanding income tax is one of those life skills they don’t teach you in school. We spend years learning things like algebra and history, but we’re left to figure out money management and taxes on our own.

Tax season can feel overwhelming, especially when you’re in your first job, or early in your career. But don’t worry, you’re not alone and it’s totally normal to feel lost at first.

To help you navigate your income taxes in Singapore, we’ll break down five income tax essentials you need to know as you step into the workforce.

#1 Singapore has a progressive income tax system

Imagine climbing a staircase where each step represents a different tax rate. The more you earn, the higher up the stairs you go, and the higher the tax rate you pay.

This is what’s known as a progressive tax system. In 2024, Singapore used 12 different tax brackets, each with its own rate.

Here’s a quick look at the progressive tax table:

For those who earn $20,000 or less annually, the tax rate is 0%. That’s right, you won’t pay any income tax. However, as your income increases, so does the rate at which you’re taxed. The maximum personal income tax rate in Singapore is 24%. But this only applies to income earned in that tax bracket (over $1 million).

Example: How the Progressive Tax Rate Works

Let’s say you earn $60,000 a year or $5,000 a month. Here’s how your tax would be calculated:

1. The first $20,000 of your income is not taxed.
2. The next $10,000 is taxed at 2%, which equals $200.
3. The next $10,000 is taxed at 3.5%, which equals $350.
4. The remaining $20,000 is taxed at 7%, which equals $1,400.

So, your total tax payable is $1,950.

As you can see, you’re not taxed a single percentage of your entire income. Instead, you’re taxed at different rates for each band of your income.

If you earn $60,000 a year, your entire income isn’t taxed at 7%; the effective tax rate is lower because only a portion of your income is taxed at each rate.

Understanding this can help you better plan your finances and not dread tax season as much!

#2 Your CPF contributions are not taxable

The CPF (Central Provident Fund) is a mandatory social security savings scheme funded by contributions from you as an employee, as well as from your employer. You’re only taxed on your chargeable income, which means the portion of your salary that goes into your CPF isn’t taxed.

Let’s break it down.

Imagine you earn $60,000 a year, or $5,000 a month. As your employee contribution to CPF is 20%, here’s how much of your income is taxable:

1. Gross Salary: $60,000 a year
2. CPF Contribution (20%): $12,000
3. Take home pay after deducting CPF contribution: $48,000 (or $4,000 a month)

This means your taxable income drops to $48,000 because the $12,000 you contributed to CPF isn’t taxed.

This is how you’ll be taxed based on that $48,000:

1. The first $20,000 of your income is not taxed.
2. The next $10,000 is taxed at 2%, which equals $200.
3. The next $10,000 is taxed at 3.5%, which equals $350.
4. The remaining $8,000 is taxed at 7%, which equals $560.

Hence, your total tax payable is $1,110.

#3 Use reliefs and deductions to pay less taxes

Paying taxes might not be fun, but it is a necessary part of life. We all need to contribute, but make sure you are only paying what you owe. There are two areas where you can trim your tax bill: reliefs and deductions.

Reliefs

First up, we have income tax relief. Think of these as rewards for doing things that the government wants to encourage. Here are a few you might be eligible for:

Supporting a spouse, parents, grandparents, or handicapped siblings? There are specific kinds of income tax relief just for you that you can find on IRAS Reliefs and Deductions page.

Deductions

Next, let’s talk about deductions. These are specific expenses you can subtract from your taxable income such as:

• Donations: If you donate to an approved Institution of a Public Character (IPC), you can deduct 2.5 times the donation amount from your taxable income.
• Work From Home (WFH) Expenses: If you’ve been working from home, you can claim deductions for allowable expenses not reimbursed by your employer.

For a full list of all the reliefs and deductions available, check out the IRAS website and to see how much you can save, try the IRAS individual income tax calculator.

By taking advantage of these income tax relief and deductions, you’re not just lowering your tax bill—you’re also making the most of your financial situation. It’s all about keeping more of your hard-earned money in your pocket, legally and smartly. 

#4 Tax filing deadline is usually mid-April each year

Tax filing in Singapore usually starts in early March and the final deadline is usually mid-April. That gives you a good month and a half to prepare.

For the Year of Assessment (YA) 2025, you’ll be reporting the income you earned in 2024. So, make sure to set a reminder to avoid any last-minute rush!

And you might get a notification via letter or SMS that you don’t need to file your taxes for the year. This is known as the No Filing Service (NFS).

However, it’s still your responsibility to check and verify that all the information in your tax return is accurate. If you spot any discrepancies, you can make the necessary adjustments on the IRAS myTax Portal.

Not sure if you need to file your taxes? Use the IRAS Filing Checker tool to find out. It’s quick and will save you from any potential headaches.

You can breeze through tax season without breaking a sweat by staying organized and proactive. Log in early, review your details, and hit submit before the deadline. You’ve got this!

#5 Your investments and dividends may not be taxed

Are you investing in the stock market or planning to, and wondering if the taxman will come for your gains? Well, good news! In Singapore, most of your investment gains and dividends are tax-free.

If you’re selling shares and making a profit, you won’t be taxed on the capital gains from selling publicly listed shares. The following gains are also generally not taxable in Singapore:

• Profits from the sale of property.
• Gains from buying and selling shares or other financial instruments, including digital tokens.
• Payouts from insurance policies, as they are considered capital receipts.

When it comes to dividends, the rules are just as friendly. Dividends earned from publicly listed companies in Singapore are not taxed, thanks to the one-tier corporate tax system.

This means that the company’s profits are only taxed at the corporate level, and any dividends you receive are yours to keep, tax-free. However, there are a few exceptions:

• Dividends from cooperatives are taxable.
• Foreign dividends received by resident individuals in Singapore generally aren’t taxed unless they are received through a partnership in Singapore.
• For income distributions from Real Estate Investment Trusts (REITs), they’re generally not taxable either, unless they’re related to a trade, business, or profession carried on in REITs through a partnership in Singapore.

IRAS has a complete list of what’s taxable and what’s not, go check it out if you’re earning money from more than just your day job.

Your income tax season game plan

If you’re in your first or second job and feeling clueless about filing taxes, don’t worry— it’s simpler than it seems, especially with the help of the Auto-Inclusion Scheme (AIS). If your employer is part of AIS, your salary information is automatically pre-filled in your tax form. Less work for you! All you need to do is log in to myTax portal, review the details, check that everything is in order and submit. Easy peasy.

To make things even easier, be sure to use the IRAS personal income tax calculator to see exactly how much you need to pay and identify what reliefs and deductions you qualify for to reduce your tax bill. This straightforward tool ensures you’re not overpaying and helps you navigate the various relief options available to you.

If you want to optimise your tax bill, get organised ahead of time. Start planning for tax reliefs and deductions early. For instance, topping up your CPF within the tax year can earn you up to $16,000 in reliefs if you top up both your own and a family member’s CPF. Mark December 31st as a deadline for these actions to ensure they count for the current tax year.

Budget for your tax payment well in advance. You can pay in a lump sum when you get your tax bill, which means setting aside money now, or opt for more manageable monthly payments through GIRO to keep your cash flow steady.

The key to a stress-free tax season is starting early and staying organised. Don’t wait until the last minute! Breathe, stay on top of things, and approach your taxes like an expert!

Here’s a quick checklist to help you get started with your tax planning:

1. Check if your employer is included in the Auto-Inclusion Scheme (AIS)
2. Use the IRAS personal income tax calculator to see how much you need to pay and identify eligible deductions and reliefs.
3. Plan and execute actions for tax deductions and reliefs early, such as topping up CPF before December 31st.
4. Keep proper records of your documents such as receipts and invoices
5. Use the IRAS Filing Checker tool to verify if you need to file taxes.
6. Set aside money in advance for lump-sum tax payments or opt for monthly payments through GIRO.

This content is part of the Temasek – Financial Times Challenge, a financial literacy education series in Singapore for youths.