Certain income tax allowances can provide significant relief to taxpayers in the buy-to-let market. Additions to section 13 of the Income Tax Act in 2008 allow a taxpayer to claim an annual allowance of 5% of the cost of a new and unused residential unit (or improvement) which the taxpayer owns until the entire cost of the asset (or improvement) has been written off (ie over 20 years).
The qualifying criteria are as follows:
- The property was acquired on or after 21 October 2008 and is situated in South Africa.
- The unit or improvement must be used by the taxpayer solely for the purposes of a trade, ie where the taxpayer acquired the property for the purpose of letting.
- The taxpayer must own at least 5 residential units in South Africa, which are used by the taxpayer for the purposes of a trade carried on by the taxpayer.
- The cost of the residential unit (or improvement thereto) must not qualify as a deduction or allowance from the taxpayer’s income in terms of any other section of the Income Tax Act.
For more information, contact one of STBB’s property professionals at www.stbb.co.za