What is a tax deduction?
Learn what a tax deduction is, which business expenses you can claim in Singapore, and how IRAS rules work.
Published Friday 24 July 2026
Table of contents
Key takeaways
- A tax deduction is a business expense you subtract from your income to work out the taxable income you pay tax on.
- In Singapore, the Inland Revenue Authority of Singapore (IRAS) sets the rules, and an expense is deductible only if it's wholly and exclusively incurred in the production of income.
- Private costs and capital purchases can't be claimed as a straight deduction, so it helps to know which expenses qualify.
- Keeping clear records of every expense you claim supports your return if IRAS ever reviews it.
Tax deductions (definition)
Understanding what counts as a tax deduction is the first step to claiming the right expenses. Here's the plain definition and how it works in Singapore.
A tax deduction is a business expense that can lower the amount of tax you have to pay. It's deducted from your income to arrive at your taxable income, which is sometimes called chargeable income. You might also hear it called a tax write-off.
In Singapore, the Inland Revenue Authority of Singapore (IRAS) sets the rules on what you can deduct. A business expense is deductible only if it's wholly and exclusively incurred in the production of income, and it isn't private or capital in nature.
Example of a tax deduction calculation
A simple worked example shows how a deduction reduces the income you're taxed on. Here's how it plays out for one small business owner.
Jo owns a photographic studio. She made S$77,000 last year and has S$15,000 of expenses she can deduct. That means her taxable income for the year is S$62,000.
What business expenses can be tax deductible?
Many of the everyday costs of running your business can be deducted, as long as each one relates to earning your business income. Common allowable business expenses include:
- office rent
- utilities
- staff salaries and CPF contributions
- business insurance
- professional and accounting fees
- business travel
What expenses are not tax deductible?
Some costs can't be claimed as a deduction, even when they feel connected to your work. These generally include:
- private or personal expenses
- capital expenses, where relief for qualifying purchases comes through capital allowances instead of a straight deduction
- any expense not incurred to produce income
Personal costs like your weekly groceries can't be claimed. If a cost is mixed use, though, you may be able to claim the business share: for example, a mobile phone used 80% for business may be partly deductible.
Deductions, reliefs and rebates: what's the difference?
These terms sound similar but work in different ways, and the Singapore search results often blur them. Here's the short version.
Deductions and capital allowances reduce a business's taxable income. Personal tax reliefs and rebates are separate, and they mainly apply to individuals rather than to your business.
How to keep records for your tax deductions
Good records make it easier to claim the right amount and to back up your return. Here's what to hold on to.
Keep receipts and records for all the expenses you deduct. IRAS requires businesses to keep proper records for at least 5 years, and solid records protect you if IRAS reviews your return.
Track your deductible expenses with Xero
Keeping your expenses organised through the year makes tax time far less stressful. Xero helps you capture receipts, sort your business costs, and see what you've spent in one place. You can get one month free and start tracking your deductible expenses today.
FAQs on tax deductions
Here are answers to some frequently asked questions about tax deductions for small businesses in Singapore.
What is the difference between a tax deduction and a tax relief in Singapore?
A tax deduction reduces a business's taxable income for expenses incurred to earn that income. A tax relief is separate and mainly reduces the taxable income of individuals.
What business expenses are tax deductible in Singapore?
You can usually deduct costs like office rent, utilities, staff salaries and CPF contributions, business insurance, professional fees, and business travel. Each expense must be wholly and exclusively incurred in the production of your income.
What expenses cannot be claimed as a tax deduction?
Private or personal costs and capital expenses can't be claimed as a straight deduction. Relief for qualifying capital purchases comes through capital allowances instead.
How long should I keep records of my tax deductions?
IRAS requires businesses to keep proper records for at least 5 years. Holding on to receipts and records supports your return if IRAS reviews it.
Related terms
Learn more about tax deductions
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.