It is very important to make sure that you do all your home work if considering investing in property for sale because of tax benefits. Many things can affect the property market and it would be a good starting point to research the various legislative and administrative changes that could create changes in the South African property market.
If you are considering purchasing a second home with the idea of buying to-let then tax benefits would apply to you. With an increase in rental demand, the market has witnessed a massive growth and it is due to this that any tax right offs will be carefully assessed. It is wise to remember that only repairs and maintenance done will have tax benefits, whereas the cost of improvements or even renovations will not be considered for any tax benefits. At the end of the day it would be wise to remember that repairs and maintenance are vastly different to improvement and reconstruction.
One needs to educate themselves on the various taxable considerations when looking at investing in property for tax benefits. If you are to purchase property and rent it out then the income that you receive from your property will be taxed, this includes:
- 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
It is advisable if a deposit is received to store this in a separate account, this will be non-taxable. It might be necessary when your tenants leave to tap into that deposit for maintenance purposes where required. Only if the deposit is forfeited by the tenant will it be seen as a taxable income.
