Basics of dealing with property tax
Tax can seem a little overwhelming after purchasing your property for sale in the Eastern Cape, but to help you navigate this tricky system, we provide you with some vital information and tips to deal with tax season when renting out a property.
After purchasing property for sale in the Eastern Cape, you may be wondering what kind of tax benefits are available to you.
If you have bought a property to use as your main residence, then unfortunately this all falls under personal costs and there is nothing that you are able to deduct once tax season arrives.
If you have snapped up a property with the intention of renting it out, then there are benefits that you can make use of, however, navigating through these can be quite tricky for those who don’t have a deep understanding of the system.
First, you need to understand that even if you have bought the property through a corporate entity or trust, it needs to be listed as taxable income for the property owner. The property also has to be regarded as one of the following residential types:
- Guesthouse
- Home
- Bed and Breakfast
- Holiday Home
- Sub-let (eg. garden flat)
- Similar residential type
Craig Hutchison, CEO Engel & Völkers Southern Africa, gives a summary of the expenses of the costs that can be deducted, saying, “These costs typically include property management fees, municipal rates, levies charged by body corporates, repairs and maintenance, insurance premiums and municipal service costs that are paid by the property owner.”
Just remember, that a deposit given to you by your tenant does not fall into the cost bracket, while you also cannot declare home improvements under maintenance or repairs – so be sure to check the definitions between the two.
Then, there is the paperwork, and you may require a lot of if. Remember to keep statements, invoices and other official records of payment easily accessible at all times. Also, it may be a smart move for you to work with a professional, at least for the first couple of years, as it could give you better insight on what the process is like.
