Nigeria's tax system is undergoing significant transformation starting January 2026, following President Bola Tinubu's signing of new Personal Income Tax Act (PIT) regulations. The changes mark a fundamental shift from the previous automatic Consolidated Relief Allowance (CRA) system to a more proactive approach where taxpayers must actively claim specific deductions to optimize their tax efficiency.
Six Key Tax Deductions You Should Know
Pension Contributions stand as one of the most significant deductions under the new framework. Regular contributions to approved pension schemes directly reduce your taxable income, resulting in lower tax payments. This structured approach replaces the automatic relief previously provided by the CRA system.
Life Assurance Premiums offer another avenue for tax savings. Premiums paid toward approved life insurance policies qualify as deductible expenses. This creates a dual benefit of securing financial protection for your family while simultaneously reducing your tax burden.
National Housing Fund Contributions provide both social and financial advantages. Payments made to the Federal Mortgage Bank of Nigeria or other approved housing schemes not only support home ownership aspirations but also serve to lower your overall tax liability.
Health and Education Benefits
National Health Insurance Scheme (NHIS) Premiums transform health coverage into a tax-smart decision. According to BusinessDay reports, premiums paid into the NHIS qualify as legitimate deductions under the updated PIT framework, making healthcare planning financially beneficial.
Charitable Donations to approved institutions represent another deductible category. Supporting causes you believe in now comes with tax advantages, allowing you to contribute to social development while improving your personal financial position.
Education and Scholarship Funds complete the list of key deductions. Contributions to approved scholarship funds or education-linked investments recognized by tax authorities can reduce your taxable income, making educational support both socially valuable and fiscally wise.
Why These Changes Matter for Nigerian Taxpayers
The elimination of the Consolidated Relief Allowance means taxpayers can no longer rely on automatic blanket relief. Instead, individuals must take responsibility for identifying and claiming eligible deductions. Failure to claim these deductions will result in paying more tax than necessary, while proper utilization means keeping more of your hard-earned money legally.
The new system demands increased awareness and strategic planning from all income earners. With the reforms taking effect in January 2026, taxpayers have limited time to understand the changes and prepare their financial strategies accordingly.
Practical Tips for Maximizing Your Tax Benefits
Maintaining proper documentation is crucial for successful deduction claims. Keep receipts, bank payment slips, policy documents, and all other proof of payments for the deductible expenditures mentioned above.
Always verify that the schemes or institutions you're dealing with are approved by Nigerian tax authorities under the PIT rules, as only payments to approved entities qualify for deductions.
Conduct annual reviews of your tax status, particularly when your employment conditions or allowances change. Consider consulting with tax professionals, especially if you have multiple income sources or uncertainty about specific deduction eligibility.
By understanding these six key deductions and incorporating them into your tax planning strategy, you position yourself advantageously within Nigeria's new tax regime. Taking control of your tax situation now ensures you're prepared for the changes rather than being caught unaware when they take effect in January 2026.
