Question 1

What is the tax rate on rental income in South Africa?

Accepted Answer

There is no separate rate. Your rental profit (rent received minus the expenses SARS allows) is added to your other income and taxed at the normal rates for individuals, from 18% to 45%, after your age-based rebate. The extra tax on your rental profit is therefore charged at your marginal rate.

Question 2

Which rental expenses can I deduct?

Accepted Answer

SARS allows expenses incurred to produce the rental income: rates and taxes, interest on the bond, advertising, estate agent fees, homeowner's insurance, garden services, repairs to the let area, and security and property levies. Capital and private expenses are not allowed. Only the interest part of a bond repayment counts, and improvements (for example a new garage) are capital, whereas repairs that restore something to its original condition are deductible.

Question 3

How do I apportion expenses if I rent out a room or cottage?

Accepted Answer

Divide the area you let by the total area of the property, including garages and outbuildings, and claim that share of the shared expenses (rates, bond interest, levies, insurance, garden, security). SARS's example lets 120 m² of 420 m², which is 28.57%. Costs that relate only to the let area, such as advertising and repairs to that area, are claimed in full.

Question 4

Where do I declare rental income on my ITR12?

Accepted Answer

In the "Local Rental Income from the letting of fixed property" section of the ITR12, with one entry per property (up to 20). A profit goes under source code 4210 and a loss under 4211. Keep the lease, receipts and bond interest certificates in case SARS asks for proof.

Question 5

What if my rental expenses are more than my rent?

Accepted Answer

The result is a rental loss. It can generally be set off against your other income, but SARS may ring-fence losses in some cases (section 20A of the Income Tax Act), and you must be able to show you are carrying on a genuine rental trade. This calculator does not work out ring-fencing. See the SARS page on tax on rental income or speak to a tax practitioner.

Question 6

Do I have to pay provisional tax on rental income?

Accepted Answer

Rental income is not remuneration, so landlords can be provisional taxpayers. SARS excludes a natural person with no business income whose interest, foreign dividends, rental and remuneration from an employer not registered for employees' tax total R30,000 or less for the year, or whose taxable income is below the tax threshold. Above that, you generally file an IRP6 twice a year. Use our provisional tax calculator to estimate the payments.

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