PROPERTY NEWS - The tax benefits of home ownership

Do you own a second property such as a guest house, holiday home or apartment that you are renting out? Aside from a regular income, one of the financial benefits of your investment are tax deductions, which you can claim back for expenses.

But before you seek reimbursement from the taxman, there are a few important things to keep in mind. If you’ve been paying for repairs to your investment property, you can only claim a refund if the expenses relate to trade assets that are damaged or have deteriorated. If you’ve done repairs to the property to improve its aesthetic appeal, in the case where the asset is serviceable, you are also not eligible to claim.

You cannot deduct expenses as a result of improvements, reconstructions or additions to your property as they are regarded as a capital expense. Neither will a deduction be allowed for repairs, if you repair a property which was previously let and which you now want to occupy or sell. You have to make the repairs whilst your property is being let.

Electricity costs, water, rates and levies to the local municipality are all expenses which you can claim back from SARS. Even if you’ve used a rental property agency, you may claim for agent fees and commissions. Basically, any expenses incurred in the production of your rental income is deductible.

So, if you’re planning to invest in an apartment in Johannesburg or holiday property in the Garden Route, with the idea of benefiting from any deductions, it’s best to seek advice from a tax consultant to ensure you are fully tax compliant.