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Good news: You can offset your rental losses from your taxable income

by , 11 July 2014
Property is always a smart investment! Buying a flat, for example, to rent out is a great way to get extra income if you can pay it off in full and don't have to worry about you bond. Sadly, for most of us that's not a real option.

This means all that lovely rental income is just pouring into your property expenses. This can even leave you with a financial loss.

The good news is you can offset these rental losses from your taxable income...

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Is that flat you rent out costing you more money than it brings in? Offset the loss from your taxable income

 
Let's look at this scenario: Let's say you earn a salary of R200 000 a year. You also have a rental income that should bring in R100 000 a year. But you have property expenses such as interest on your bond and levies that comes to R12 000. That means you actually make a loss of R20 000 on your property. 
 
That's a huge amount of money but the good news is there's a way you can ease this financial loss if you offset it against your other income tax...
 

Here's when you can offset your rental loss against your other taxable income

 
You can offset your rental loss against your other taxable income if:
 
1. You haven't had other rental losses for more than three previous years within the last five years of assessment; and
2. 80% of the property belongs to tenants (under your lease agreement) who aren't relatives of yours.
 
Just be aware that SARS will audit the loss so ensure you have all of your documentation to prove you own the property and your expenses.
 
PS. We also suggest you try get a bit of cash back on your tax by getting rental property tax deductions on expenses like repairs and maintenances. 
 
You can find out how to do this in the Practical Tax Loose Leaf Service
 


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