Hi all - just want to confirm my understanding of how the rental reimbursement scheme works for tax purposes (and whether I should use it).
My company (like many others) allows me elect to take part in their rental reimbursement scheme. Effectively, as I understand it, this means that the rent I pay is deducted from the total taxable income (it appears on the tax return as my employer paying it), and instead I take the remaining income (post deduction) and add on an extra 10%, i.e. the total taxable income becomes (AnnualIncome - AnnualRental) * 110%.
On the other hand, if I don't elect to take part, then my total taxable income is simply AnnualIncome.
So the break even point is (AnnualIncome - AnnualRental) * 110% = Annual Income
And therefore (rearranging the above), I should only elect to use the rental reimbursement scheme if AnnualRental > 1/11 AnnualRental, i.e. my rent is over ~9% of my income.
Is that right or am I missing something? I ask because I'm below the 9% threshold and don't want to end up losing out by opting out...