Are All Medical Expenses Tax-Deductible? Not Quite – Here’s What SARS Actually Allows

A white piggy bank surrounded by coins and a stethoscope, representing the intersection of medical expenses and financial decisions, hinting at what’s actually tax-deductible under SARS regulations.

Many of our clients are under the impression that every medical expense – even those with a prescription – is fully deductible for tax purposes. The reality is a little more complex. Unless your out-of-pocket expenses are substantial, keeping every pharmacy slip might not give you the refund you were hoping for.


Let’s break it down clearly and simply, using SARS’ official guide on the determination of medical tax credits as our main source.

What Are Medical Tax Credits?

SARS provides two types of medical tax relief:

  1. Medical Scheme Fees Tax Credit (MTC) – A fixed monthly amount for contributions to a registered medical scheme.
  2. Additional Medical Expenses Tax Credit (AMTC) – A more complicated calculation aimed at helping those with high medical costs not covered by their medical aid.

This article focuses on the second one – the AMTC – and what really qualifies as “significant” enough to benefit your tax return.

Common Misconception: “If I have a script, I can claim it”

Unfortunately, not every script or medical invoice will get you money back. SARS has strict criteria, and only specific out-of-pocket expenses qualify – and even then, only after a threshold is reached.

Here’s the truth:

 

  • If you (or a dependant) have no disability, you can only claim a portion of your medical expenses that exceed a fairly high threshold.
  • If you (or a dependant) have a registered disability, or if you are 65 or older, SARS gives you much more relief.
  • Medical aid contributions already covered by the fixed credit (MTC) don’t count again under AMTC.

When Is It Actually Worthwhile?

This is where most people are surprised. You only get a credit if your qualifying expenses are high enough. SARS applies a formula that depends on your age and whether any person on your medical aid has a registered disability:

  • If you’re under 65 and don’t have a disability: You can claim 25% of the amount by which your expenses exceed 7.5% of your taxable income (after adjusting for what you already claimed via the MTC).
  • If you’re over 65 or have a registered disability: You can claim 33.3% of your qualifying medical expenses and excess contributions — and no income threshold applies.

Practical Example: When Medical Expenses Don’t Qualify

Let’s say:

  • You earn R400 000 for the year
  • You pay R40 000 to your medical aid for you and your spouse
  • You spend R12 000 on medical costs not covered by your medical aid
  • You are under 65 and not disabled

Let’s calculate it step-by-step:

Step 1: Know the key numbers

  • Fixed medical tax credit = R364 × 12 × 2 = R8 736
  • 4 × this credit = R34 944
  • 7.5% of income = 7.5% × R400 000 = R30 000
  • Only R5 056 of your medical aid contributions count toward AMTC (R40 000 − R34 944)
  • Add R12 000 out-of-pocket = R17 056

Step 2: Compare to the income threshold

  • R17 056 − R30 000 = −R12 944 Final step: Since the result is negative, you get R0 back

Even though you paid R12 000 out-of-pocket, SARS won’t give you any additional credit unless your expenses are much higher.

Final Word

The medical tax credit system is there to assist those with real and substantial healthcare costs. It’s a generous system if you qualify – but for most taxpayers, especially those with basic medical aid cover and occasional expenses, the Additional Medical Expenses Tax Credit might offer less than expected.

In Short:

  • Keep medical slips only if your costs are substantial
  • If you’re over 65 or have a disability, tax savings can be significant
  • If not, you’ll need to exceed high thresholds before it’s worth it

Want help running the numbers before you spend a weekend sorting pharmacy slips? Reach out to us at On Q Accounting and Tax Services – we’ll help you claim what’s due and skip what’s not worth it.

Disclaimer: This article is intended for general information purposes and does not constitute legal or tax advice. For tailored assistance, please consult a registered tax practitioner.