DURBAN - People frequently make decisions regarding property investments without a full understanding of the tax implications involved.
It’s important to take into account that if you invest in rental property, the income made is subject to income tax. Also, when you sell the property one day you will need to pay Capital Gains Tax.
Jeremy Burman of Private Client Financial Services, a division of Private Client Holdings provides a list of five common tax-related questions and gives brief answers for each:
1. The costs for my investment property exceed my profits, why do I have a tax liability?
“You will be taxed on your rental income less any allowable expenses incurred in earning this income. As such, although the expenses incurred on your property may exceed the amount received in rental income, a taxable rental profit may still arise because of the non-deductibility of certain capital costs - such as bond capital repayments and renovations.”