What is the medical scheme fees tax credit?
The medical scheme fees tax credit is a fixed monthly credit that reduces the income tax of a South African taxpayer who pays contributions to a registered medical scheme. It comes off the tax itself, not taxable income, so it has the same value at every income level, and employers apply it in the monthly PAYE calculation.
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For the 2027 tax year, from 1 March 2026, the monthly credit is:
- R376 for the taxpayer;
- R376 for the first dependant, so R752 for a taxpayer and one dependant;
- R254 for each additional dependant.
A family of four therefore has a credit of R1,260 a month. The amounts rose from R364 and R246, which applied for the previous three tax years, and can change in each national budget.
Employer contributions
Medical scheme contributions an employer pays for an employee are a taxable fringe benefit. They are added to the employee’s remuneration and also treated as paid by the employee, so the employee still gets the credit. On the IRP5, the benefit goes under code 3810 and the deemed contribution under code 4005. If more than one person pays for the same member, the credit is shared in proportion to what each one pays.
The additional medical expenses tax credit
A further credit applies to some out-of-pocket costs and excess contributions. For taxpayers aged 65 or older, or where the taxpayer, a spouse or a child has a disability, it is 33.3% of qualifying expenses, subject to the formula in the law. Other taxpayers can also claim a smaller additional credit, and it is settled on assessment. Payroll takes the part relating to scheme contributions of over-65s into account in monthly PAYE.
Medical credits when TopSource runs your payroll
When TopSource runs your payroll in South Africa, we apply the right credit each month from the number of members covered, include employer contributions as a fringe benefit and report everything on the IRP5.
Frequently asked questions
How much is the medical tax credit in 2026?
From 1 March 2026, R376 a month each for the taxpayer and the first dependant, and R254 for each additional dependant.
Do employees get the credit if the employer pays the medical aid?
Yes. Employer contributions are taxed as a fringe benefit and treated as paid by the employee, who can then claim the credit.
Does the employer apply the credit, or the employee?
The employer takes it into account when it calculates monthly PAYE, and the final position is confirmed when the employee is assessed.
Related terms in South Africa
- Temporary Employment Services (South Africa)
- Section 198B Fixed-Term Rule (South Africa)
- BCEA Earnings Threshold (South Africa)
- Retrenchment (South Africa)
- Restraint of Trade (South Africa)
- Family Responsibility Leave (South Africa)
- Sick Leave Cycle (South Africa)
- Employment Equity Act Reporting (South Africa)
- B-BBEE Scorecard (South Africa)
- Critical Skills Work Visa (South Africa)
- POPIA and Employee Data (South Africa)
- EMP201 Monthly Return (South Africa)
- EMP501 Reconciliation (South Africa)
- IRP5 and IT3(a) Certificates (South Africa)
- Tax Directive (South Africa)
- Fringe Benefits Tax (South Africa)
- Travel Allowance (South Africa)
- Retirement Fund Two-Pot System (South Africa)
- Employment Tax Incentive (South Africa)