It is that time of year again when individuals must attend to their tax filing obligations. This requires working through heaps of documentation to complete the submission of a tax return.
Fortunately (or unfortunately), some of these documents are provided directly to SARS by third parties such as banks, medical aids and investment houses, to name but a few. However, some information is not provided by third parties, which a taxpayer needs to be cognisant of to submit as part of their tax return. One income line item that often slips through the cracks is rental income earned from investment properties.
Having a rental property means that rental income must be declared, but expenses incurred as part of leasing that property may be allowed as a deduction against such income. Typically expenses that can be deducted against rental income are as follows:
- Rates and taxes;
- Levies;
- Electricity (to the extent borne by the lessor);
- The interest component of the monthly costs to service the lessors bond;
- Repairs in respect of the rented property; and
- Garden service; and
- Any other expenses sufficiently linked to the leasing of the property.
To claim these expenses, it is vitally important that taxpayers retain the necessary documentary proof to demonstrate the deductibility of the expenses. Broadly, this requires proof that the expenses incurred are closely linked to earning the rental income. Capital expenditure (such as improvements to the property) will not be allowed as a deduction. As a general rule, it is important to stress test the deductibility of all expenditures incurred with your tax practitioner to ensure that all expenses have been appropriately claimed.