Tax Man Eyes Rental Property during 2010

December 28 - With the World Cup kicking off in South Africa next year, it makes sense that accommodation seeking becomes the highest priority of the hundreds of thousands expected to descend on the country next year.

South African property owners have recognized the huge potential there is to be had in renting out their homes during the FIFA World Cup and can expect to make anything from a few thousand a day to as much as R70,000 - depending on the location and type of property.

Another sector of the country is also expecting to make a fortune on the World Cup - the South African Revenue Services (SARS), which will tax any income that South Africans make on their properties.

The rental income will be taxed at the marginal rate and will need to be declared as gross income, according to financial experts.

It should be noted by those hesitant in renting out their properties because of tax issues, that all expenses will be deductable.

Owners should therefore consider expenses such as rental agent commission, electricity, water, rates and taxes on the property, cleaning service, mortgage interest, etc.

In addition, home owners can also claim  insurance that they will need to take out on the property to make it fit for renting out.

As tempting as it may be to evade taxes and simply rent out property without declaring it to the tax man, property experts are warning South Africans that SARS has ways and means of ensuring that the money reaches their coffers in the end.

For example, rental agencies are obliged by law to hand over documents to SARS that declare the rent collected by the property owner.

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12/28/2009 9:34:55 AM