How do the medical aid deductions for 2013 work - become dependent or become principle member?

Hi Tax Tim, thank you for a very informative website, I've learnt a lot!

My question is this: which option is more tax beneficial?

My situation:
My wife and I are both principle members of the same medical aid, with a baby on the way. My understanding of the new tax credit rules for 2013 would imply that it doesn't really matter how we as a family structure our medical aid. Be it as 1 principle member and 2 dependents, or 2 principle members and 1 dependent. Is this correct? The new rules disregard the fact that I am in a higher tax bracket as well. The only possible deciding factor would be the amount that is calculated as the 7.5% of our individual taxable incomes. My wife has a greater opportunity to claim something if we do have high medical expenses, as her threshold is lower.

Am I totally off track here?
Thank you.

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TaxTim TaxTim says:
9 November 2012 at 6:13

Thanks very much for the kind words and we are glad you are making good use of our site.

You are spot on with your understanding. Regardless of the number of dependents/members the amount allowed as a tax credit will be the same. R230 per month for the first two members and a further R154 for every member thereafter. This was designed to even out the tax benefit for all taxpayers with medical aid contributions regardless of their income bracket.

Regarding the 7.5%, this may change in the next budget, but for now it would make more sense for someone who has is in a lower tax bracket to cover out of pocket expenses and with the new tax credit rules, have themselves the principle member of the medical aid with the rest of the family as their dependents.

I hope that answers your question.

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