If you are looking at property for sale with the desire to benefit from tax, you might want to think again. There are many benefits to purchasing property, especially if you want to rent out a second property in order to generate income. Before investing in a property with this need in mind, it is desirable to do your homework and find out what the requirements regarding tax are.
It is important to educate yourself on the various factors that might impact the property market in South Africa, for example legislative or administrative changes. There are various consultants that you can make use of in order to ensure that you are doing things by the book; a tax consultant would be a good idea, or you could even visit your local SARS office and gain some first-hand experience on the matter.
Planning for this kind of investment is highly advisable, it is important to understand the type of investment you are making, whether it will be a long-term or short-term investment. The best way to benefit from tax when purchasing property is when purchasing a second property with the intention of renting, bearing in mind that the income you receive from your tenants will be considered a taxable income.
Another factor that should be considered is that of maintenance and repairs, while these will be able to be claimed back from tax, there is a clear distinction between maintenance and repairs, and renovations and home improvements. Home improvement and renovation costs are considered a capital expense which would be added into the base cost of the property to either increase or decrease the overall value.
Any deposit received from your tenants will be considered as non-taxable income, this amount needs to be put into a trust account and should not be touched. In the event that repairs need to be done it will be deducted from this amount, if the tenant should forfeit their deposit this will be seen as a taxable income.
