Staff author
Your rental property has expenses SARS wants you to declare
When you rent out a house or apartment, SARS requires a cut of the income. Fortunately, the law also provides a long list of property expenses you can deduct, meaning you only pay tax on your actual profit.
How it works
Section 11(a) of the Income Tax Act allows landlords to deduct expenses directly related to earning rental income. This includes municipal rates, levies, property insurance, letting agent commissions, and the interest on your bond. You calculate your total rental income, subtract all these qualifying expenses, and SARS taxes the remaining amount.
Specific Scenarios
* Scenario 1: The broken geyser. Your tenant reports a burst geyser. You pay R8,000 to replace it. SARS classifies this as a repair, allowing you to deduct the full R8,000 from your rental income immediately.
* Scenario 2: The letting agent. You pay a property agency 10% of the rent each month to manage the tenant. You submit the agency's invoices to SARS and deduct their fees from your taxable income.
* Scenario 3: The bond interest. You have a mortgage on the rental property. Your bank statement shows you paid R100,000 toward the bond this year, of which R80,000 was pure interest. You deduct the R80,000 interest portion to significantly lower your tax bill.
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When you are not eligible
You cannot deduct capital improvements. If you install a brand-new swimming pool to increase the property's value, that is an improvement, not a repair. You cannot deduct the cost of the pool against your current rental income.
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Disclaimer:This article is for informational purposes only and does not constitute financial or tax advice, and is not exhaustive. Tax laws are complex and subject to change. We strongly recommend consulting with our registered tax practitioner to address your specific circumstances.