Rental income and tax

[marco79]

We are renting out our house as of 1 December.

Should I let the rental income be paid into my wife's banking account instead of mine? She is a housewife and thought it could be better tax - wise if the rental income doesn't get added to my income tax.

Any advise?

 

[Pakka]

Yes you should let the rent reflect on her income instead of yours - much more tax efficient

 

[AchmatK]

Yes you should let the rent reflect on her income instead of yours - much more tax efficient

Actually, it doesn't matter in whose bank account the rent gets paid into. What matters is that the owner of the property to whom the rental income accrues declares the rental income on their tax returns. So if you are the owner, you will need to declare the rental income even if the rent is paid into a third party bank account.

 

[marco79]

The house is in both our names. I actually think the rental agreement will be in my name.

We'll be signing the rental agreement tomorrow.

 

[surface]

http://www.property24.com/articles/buying-property-jointly-our-tax/19923
Also, rental income is always apportioned 50/50 by SARS in cases where people are married in community of property.

 

[marco79]

http://www.property24.com/articles/buying-property-jointly-our-tax/19923
Also, rental income is always apportioned 50/50 by SARS in cases where people are married in community of property.

Thanks for this. I think we will have the rental income paid into her account in order for her to start building a better credit score. Her credit rating has been non existent since finishing all her accounts years ago.

 

[Replay]

Actually, it doesn't matter in whose bank account the rent gets paid into. What matters is that the owner of the property to whom the rental income accrues declares the rental income on their tax returns. So if you are the owner, you will need to declare the rental income even if the rent is paid into a third party bank account.

This..

Any additional form of income needs to be declared....make sure that you also claim for any maintenance or upgrade expenses to the property

 

[A Non Blonde]

This..

Any additional form of income needs to be declared....make sure that you also claim for any maintenance or upgrade expenses to the property

Be careful with this, from http://www.sars.gov.za/TaxTypes/PIT/Pages/Tax-on-rental-income.aspx

Maintenance and repairs should be noted as specific costs and should not be confused with improvement costs. The latter is a capital expense that would be included in the base cost of the property, to effectively reduce the capital gain (or loss) on the disposal of the property, for capital gains tax purposes.

The following expenses may however be claimed

Which expenses are allowed?

Expenses that may be deducted from taxable income include:

rates and taxes
bond interest
advertisements
agency fees of estate agents
insurance (only homeowners not household contents)
garden services
repairs in respect of the area let and
security and property levies

 

[marco79]

We will still have a shortfall of a few hundred rand on our bond, so won't be making any profit.

 

[mjwitter]

We will still have a shortfall of a few hundred rand on our bond, so won't be making any profit.

Just remember that you can only deduct the interest portion of your bond payments, not the capital portion.