Malaysians filing their tax returns this year will benefit from several new and expanded tax reliefs, but they should also be aware of a new taxable income.
For the first time, dividend income is subject to tax. Accounts and tax expert Datin Christine Koh explained, “A 2% tax is imposed on total dividend income exceeding RM100,000 a year, regardless of how many companies it comes from. Many taxpayers may overlook this because dividends were previously tax-free.”
On the relief side, families and caregivers stand to gain the most. Parent medical expenses relief has been increased to RM8,000 and now includes grandparents. Sports-related lifestyle relief of up to RM1,000 has been expanded to cover expenses for parents, in addition to the self, spouse, or children.
Relief limits for persons with disabilities have also risen: RM7,000 for disabled individuals, RM6,000 for a disabled spouse, and RM8,000 per disabled child. Education and medical insurance relief has increased to RM4,000, while environmental sustainability relief of up to RM2,500 now includes food waste composting machines, claimable once between assessment years 2025 and 2027.
Despite these expansions, Koh warned that many taxpayers still miss out due to misunderstandings. “Common mistakes include assuming both parents can claim childcare relief or overlooking that sports equipment bought for parents is claimable. Dental treatment expenses up to RM1,000 and skill-enhancement courses are also often under-claimed,” she said.
However, Koh noted that tax reliefs only reduce tax payable, not actual spending. “At a 20% tax rate, spending RM1,000 saves only RM200 in tax. The remaining RM800 is still an out-of-pocket expense. The RM9,000 personal relief equates to about RM25 a day—far from enough to cover basic necessities.”
First-time homebuyers should also note the new housing loan interest relief. Tax expert Datuk Koong Lin Loong explained, “Loans signed between Jan 1, 2025, and Dec 31, 2027, are eligible. Properties priced RM500,000 or below can claim up to RM7,000 a year, while homes priced between RM500,000 and RM750,000 can claim up to RM5,000 annually for three consecutive years. For example, a loan signed at the end of 2027 can provide relief until 2029.”
