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Thread: Rental loss offset against personal Tax?

  1. #1
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    Rental loss offset against personal Tax?

    Hello everyone,

    Hoping some Tax expert can help me here.

    I'm a salaried person and recently acquired a "second" property which i will let out. I'm in this long term as capital growth is my main focus.

    I will have a monthly shortfall on the property (and i estimated for another 4 years or so).

    My Question is:

    Lets say my salary is R20 000p/m x 12 = R 240 000.00 p/annum

    Rental Income less expenses (bond interest, rates & taxes, insurance) etc. I know what i can deduct against the income.

    I will make a Loss of roughly R 35 000 in the first year alone, so what i'm battling with is can this "loss" reduce my own personal Tax liability from my
    salary which i paid over throughout the year? I have already being registered for Provisional.

    I just need to know if i can have this "loss" reduce my income tax?

    Regards

  2. #2
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    Hi Mango, it should be allowed in your case.

    Sec 20A provides for ring fencing of trade (including rentals) losses, but it can only be applied if the taxpayer is a natural person whose taxable income (before the deduction of any assessed losses) is subject to the maximum marginal rate of tax and he/she either had an assessed loss in at least three out of the last five tax years or the assessed loss arises from one of the suspect trades listed in section 20A(2)(b).

    So you should be ok. However, expect to be audited in some measure.

  3. Thank given for this post:

    Dave A (04-Aug-16), mango (08-Aug-16)

  4. #3
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    Another question i forgot... The bank requires me to put down a deposit of R140 000 on the new flat which i will let out.

    I will borrow this on my existing bond and use that as the deposit ... but my question is what will SARS do if i in say 2 years "borrow" that same R140 000 on the rental unit and transfer it back to my bond? Will they then "disallow" the bond interest on that amount going forward or will they see it as "i took it back as i gave this in the first place"?

  5. #4
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    In my opinion you should be claiming the interest on the first R140,000 anyway, because the principle of expenses incurred in the production of income is present. In the second instance I believe it is still there?

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