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Thread: Rental Income - What can I deduct ?

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    Rental Income - What can I deduct ?

    Hi everyone

    As a sole prop, what can I deduct from all my rental income as expenses ?

    I receive rental income from two units.
    I am not employed.
    My wife is employed.
    We are married in community.
    I can do most of the the work on the rental units myself.
    We own one town house, fully paid cash, and have my primary residence on bond, which we are still paying.
    We receive Rental income from the townhouse as well as a granny flat on our primary residence.

    Can I deduct the following ...

    1) Deduct Maintenance costs on the unit for materials. eg I needed to repaint one unit and fit doors to another unit, as well as do some plumbing.
    2) Deduct a labour rate for the work I can do myself
    3) Deduct costs for installing burglar proofing
    4) Deduct costs for installing a separate water meter to one of my units
    5) Deduct costs for installing a separate electricity meter, or installing prepaid meter
    6) Deduct my medical aid expenses
    7) Deduct my RA expenses
    8) Deduct DSTV, if I offer DSTV in my contract i.e I deduct half the DSTV expense as I will also use DSTV
    9) Deduct my office costs, like consumables, telephone, stationery, advertising, printing (especially when trying to procure a tenant)
    10) Deduct building/construction costs, if I decide to make alterations or increase the size of one of the units at a later stage in the year
    11) Deduct construction costs, if I decide to build a third rental unit in our yard.

    Also how will this affect my wife, or can I just declare everything on my tax return ?

    Regards

    Jules

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    Gold Member Houses4Rent's Avatar
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    Better ask a professional and/or SARS to be certain.

    You have to split between maintenance (repairs) and improvements (building extra rooms).
    Houses4Rent
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    I'm also curious to know what some tax practitioners on this board have to say about expenses, how do you know what to claim and what not to? I think your bond interest and rates are deductable too.

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    Gold Member Houses4Rent's Avatar
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    I claim most of the listed items. Definitely interest on bond and rates and services (as my tenants do not pay those except elec)

    I work from home so I pro rate my expenses - a small share allocated to my business which is letting

    But I am married ANC so I do not have any experience on that aspect.

    RA expenses have limits like I think 15% of pensionable income. My memory is faint as I stopped my RA's ages ago.
    Houses4Rent
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    Bronze Member Beancounter's Avatar
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    1) Deduct Maintenance costs on the unit for materials. eg I needed to repaint one unit and fit doors to another unit, as well as do some plumbing. - Yes, you can deduct this
    2) Deduct a labour rate for the work I can do myself - Then you must declare the labour as personal income again. Rather leave it out.
    3) Deduct costs for installing burglar proofing - This could be seen as a capital improvement. If it was less than R7 000 you could perhaps get away with expensing it though.
    4) Deduct costs for installing a separate water meter to one of my units - Same as (3)
    5) Deduct costs for installing a separate electricity meter, or installing prepaid meter - Same as (3)
    6) Deduct my medical aid expenses - Yes but complete the medical expenses part of the ITR12, do not deduct all expenses from the rental income. This is subject to Section 18.
    7) Deduct my RA expenses - Yes but complete the RA part of the ITR12, do not deduct all RA payments from the rental income. This is subject to Section 11(n).
    8) Deduct DSTV, if I offer DSTV in my contract i.e I deduct half the DSTV expense as I will also use DSTV - Yes, deduct 50% of the expense.
    9) Deduct my office costs, like consumables, telephone, stationery, advertising, printing (especially when trying to procure a tenant) - Yes, deduct if in the procurement of rental income.
    10) Deduct building/construction costs, if I decide to make alterations or increase the size of one of the units at a later stage in the year - No, this is a capital improvement. Keep the records however for future Capital Gains Tax calculations.
    11) Deduct construction costs, if I decide to build a third rental unit in our yard. - No, see (10)

    Also how will this affect my wife, or can I just declare everything on my tax return ? - You indicate on the personal details page that you are married in community of property and 50% of the net rental income will be taxed in your hands and the other 50% in your spouse's hands.

    If you're unsure about the assessment to be expected, do the eFiling calculation before submitting to see if 50% is indeed being taxed proportionately as intended.

    Regarding the bond, you can claim bond interest and charges if the bond is registered over the rental property. In the case where your residence is mortgaged and there is a granny flat on the property and its being rented out, you can claim those expenses proportionately. Use the size of the property to apportion the bond expenses, rates and taxes, garden services, insurance, cleaning services etc.
    Last edited by Beancounter; 18-Sep-14 at 09:42 AM.

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    Dear BeanCounter

    Thank you so much for your information.
    I will definitively be using the services of an accountant next year to do my tax, but I just wanted some more information to assist me with my record keeping for this new financial year as I just recently started renting out my units.

    Thanks again

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