Property and tax benefits

Looking at property for sale with the idea of writing off expenses requires research into what the law states. If you are aiming to benefit from tax through home ownership, this is achievable when investing in a second property with the plan of buying-to-let.

When renting a property the income received from your tenant will be considered as a taxable income. The deposit received will be a non- taxable payment but needs to be placed in a trust account and should not be used by the owner. In the event that the tenant forfeits their deposit it will then become a taxable income.

Various scenarios that you would earn a taxable income due to renting out a property:

• holiday homes
• bed-and-breakfast establishments
• guesthouses
• sub-renting part of your house e.g. a room or a garden flat
• dwelling houses
• similar residential dwellings

Any income you receive through renting should be added to any other taxable income that you may have. If any expenses are incurred during the time frame of the property being let, then these costs may be claimed back, but any private or capital expense will not be tax deductible.

Here is a list of expenses that will be able to be claimed back:

• rates and taxes
• interest on bonds
• ads
• collection fees of estate agents
• insurance (only homeowners not household contents)
• garden maintenance
• repairs
• security and property levies

A clear understanding of the difference between repairs and maintenance and that of renovations and home improvements is needed. While any costs incurred for repairs and maintenance will be able to be claimed back, home improvement and renovations will not.

It is not advisable to avoid paying tax, as SARS will not be lenient in any circumstances. You could also make use of a tax consultant to ensure that you meet all the requirements.