The 2025 national budget introduces a host of tax relief updates aimed at easing the financial burdens of individuals and families across Malaysia. The updates span a variety of categories including healthcare, education, lifestyle, savings, and more. These changes aim to foster proactive healthcare management, promote healthy living, support family welfare, and encourage long-term financial planning. Below, we provide an in-depth breakdown of the key updates and their potential impact on taxpayers.
1. Expanded Medical Tax Relief
Self-Examination Devices & Disease Detection Tests
One of the most significant changes in this year’s budget is the inclusion of tax relief for self-examination devices such as glucometers, blood pressure monitors, and other personal health monitoring tools. Additionally, disease detection tests—including blood tests, mammograms, and ultrasounds—are now eligible for tax relief. This expansion is a step towards promoting proactive healthcare and preventive medical practices, enabling individuals to keep track of their health without the financial strain.
Children’s Medical Treatments
Tax relief for medical treatments involving children with special needs has also been increased. Previously set at RM4,000, the relief for children diagnosed with conditions such as autism, ADHD, and Down syndrome is now increased to RM6,000. This adjustment provides much-needed support for families facing the ongoing medical costs associated with caring for children with special needs.
2. Increased Lifestyle Tax Relief
Sports-Related Expenses
The government has widened the scope of tax relief related to sports expenses. Previously covering only costs for sports equipment and related fees, the new relief now extends to include parents as well. This update encourages families to invest in sports and physical activities for their children, further supporting public health and wellness. With an increased emphasis on promoting active lifestyles, this change helps reduce barriers to accessing sporting activities.
3. Tax Relief for Medical Treatment and Parental Care
RM8,000 Tax Relief
This category introduces a substantial tax relief of up to RM8,000 for medical treatments, special needs care, and parental care expenses. Eligible expenses include medical treatments, homecare services, daycare centers, nursing homes, dental treatments (excluding cosmetic procedures), and preventive health measures like vaccinations and health check-ups. This relief is a boon for families managing the costs of elderly care or special needs support, providing greater financial flexibility.
RM3,000 Tax Exemption
Additionally, individuals receiving childcare allowances from employers may now claim a tax exemption of up to RM3,000. This exemption is applicable to children up to 12 years of age and extends to expenses related to elderly care, benefiting families with both young children and aging parents or grandparents. The inclusion of elderly care expenses is a particularly important development in supporting multi-generational family care.
4. Tax Relief for Education and Medical Insurance
RM4,000 Tax Relief
To help reduce the financial burden of both healthcare and education, the government has increased the tax relief for premiums paid toward medical and education insurance. Previously set at RM3,000, the relief has now been raised to RM4,000. This change allows individuals and families to save more on premiums for insurance policies covering education and healthcare needs, enhancing both long-term education planning and personal health coverage.
5. Tax Relief for Private Retirement Scheme (PRS) Contributions
RM3,000 Tax Relief
Tax relief for contributions to Private Retirement Schemes (PRS) has also seen an update. Individuals contributing to approved PRS or premiums for deferred annuities can now claim a tax relief of up to RM3,000. This relief has been extended until 2030, providing ample time for individuals to enhance their retirement savings. The extended period encourages long-term retirement planning, helping ensure a more secure financial future for retirees.
6. Tax Relief for First-Time Homebuyers
RM7,000 Tax Relief
For first-time homebuyers, the budget introduces a tax relief on housing loan interest payments. The relief covers homes priced up to RM500,000 with a tax break of RM7,000. For homes priced between RM500,000 and RM750,000, the relief is capped at RM5,000. This relief applies to housing agreements signed between January 1, 2025, and December 31, 2027, making it an excellent opportunity for those looking to buy their first home. This initiative provides financial support to first-time buyers, helping to alleviate the strain of mortgage interest payments.
7. Tax Relief for Electric Vehicle (EV) Chargers
RM2,500 Tax Relief
As part of Malaysia’s push toward sustainability, the 2025 budget includes a tax relief of up to RM2,500 for the purchase of electric vehicle (EV) charging equipment. In addition, this relief now includes costs for food waste composting machines, further promoting environmentally friendly practices. The tax relief for EV chargers is available until the Year of Assessment 2027, providing an incentive for individuals to invest in sustainable living solutions.
8. Tax Relief for National Education Savings Scheme (SSPN)
RM8,000 Tax Relief
The RM8,000 tax relief for net annual savings in the National Education Savings Scheme (SSPN) has been extended until the Year of Assessment 2027. This initiative supports families who are planning ahead for their children’s higher education. By providing a tax incentive for early savings, the government aims to make higher education more accessible to Malaysian students and reduce financial burdens on families.
9. Tax Relief for Nursery or Kindergarten Fees
RM3,000 Tax Relief
Parents paying for childcare services at registered nurseries (taska) or kindergartens (tadika) can now benefit from a tax relief of up to RM3,000. This relief has been extended until the Year of Assessment 2027, making it easier for families to afford early childhood education. With education being a cornerstone of a child’s future, this relief helps ensure that families can provide quality early education for their children.
10. Tax Relief for Disabled Individuals
RM7,000 Tax Relief
The budget also offers increased tax relief for individuals with disabilities. The relief for taxpayers who are disabled has been raised from RM6,000 to RM7,000, providing more financial support for those living with disabilities. In addition, the tax relief for individuals with a disabled spouse has increased from RM5,000 to RM6,000, while the relief for unmarried disabled children has risen from RM6,000 to RM8,000. These adjustments provide greater financial assistance to families caring for disabled dependents.
11. Tax on Dividends
2% Tax
The budget also introduces a 2% tax on annual dividend income exceeding RM100,000 after accounting for relevant deductions and allowances. While this tax will apply to a select group of high-income earners, there are exemptions in place. For example, dividend income from foreign sources, the Employees Provident Fund (EPF), and Amanah Saham Nasional Bhd (ASNB) are not subject to this new tax. This change primarily targets wealthier individuals with substantial dividend income.
12. Stamp Duty on Life Insurance Policies
Stamp Duty Rate
A new stamp duty will apply to the assignment of life insurance policies and family takaful certificates. The stamp duty will be based on the transfer value of the policy ownership and is capped at RM1,000. This measure seeks to address the administrative costs associated with transferring ownership of life insurance policies, while also ensuring that tax collection on such transactions remains robust.
Conclusion
The 2025 budget tax relief updates bring a range of positive changes that are designed to provide more financial relief and incentives to individuals and families. With increased support for healthcare, education, retirement savings, and family care, these changes aim to create a more financially secure and sustainable future for all Malaysians. Whether you are a parent looking to save for your child’s education, a first-time homebuyer, or an individual planning for retirement, these updated tax relief measures provide valuable opportunities to optimize your financial planning.
It is essential to stay informed about these updates and utilize the new tax breaks to your advantage. With careful financial management, individuals can maximize the relief provided by these changes and build a more secure future for themselves and their families. Make sure to keep an eye on the new relief categories and make the most of the 2025 budget’s offerings to ease your financial planning in the coming years.
