What home owners should know before filing their tax return

Tax season is upon us and individual taxpayers have until 23 October 2023 to submit their returns. For landlords and for those who work from home, this presents an opportunity to claim back for certain expenses.

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett explains that while ordinary homeownership does not offer any tax benefits, owning a second home will affect an individual’s tax return. “Landlords are required to declare the total amount of rental income received as part of their taxable income. They can lower that taxable income by making certain deductions of non-capital expenses,” he explains.

Explaining what is meant by non-capital expenses, Goslett says that there are certain expenses that a landlord is obliged to incur when letting out a property. Examples of non-capital expenses include items such as:

• Rates, taxes, and property levies
• Security costs and garden services
• Interest paid on the home loan
• Advertising costs of marketing the property and / or the rental agent’s fees for securing a tenant
• Insurance (only homeowner’s insurance, not household contents insurance)

Repairs in respect of the area let (not applicable if the tenant has moved out and repairs are made to the home to sell it)

By deducting these expenses, landlords can lower how max tax is owed by lowering their taxable income. “These expenses won’t automatically reflect on your return, so it is important to take the time to submit these when filing your return. Be sure to keep all receipts on file in case SARS ever asks for proof of the expenses,” he advises.

Another thing that won’t automatically be included on an individual’s tax return is the deduction for home office expenses (if it applies). Goslett notes that a tax-deduction can be made based on the interest charged on the outstanding bond amount if the individual is employed and a condition of the employment is to carry the cost of keeping a home office as the central business location.

It can be complicated to perform the necessary calculations for this deduction, especially if the homeowner withdraws an amount from the bond or makes a substantial additional payment towards the bond. Goslett recommends that homeowners consult with a professional tax consultant to help them work out this amount correctly.

“It is important to work out any tax deductibles correctly, as there could be serious penalties if the return is submitted incorrectly. If there is ever any area of doubt, it is best to consult with a professional financial adviser or tax consultant who can provide assistance and guidance through the process,” Goslett concludes.