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Capital gains tax when you sell your home
If you sell the home you live in, you probably pay no capital gains tax. For individuals, the first R3 000 000 of gain on a primary residence is left out of the calculation. Tax can still apply if your gain is bigger than that, or if the property is not your main home.
What capital gains tax is
Capital gains tax (CGT) is not a separate tax. It is the part of your profit on an asset that is added to your taxable income in the year you sell. The profit is the selling price minus your base cost. Your base cost is mainly what you paid for the property, and it can include the costs of buying it and money spent on improvements. A tax practitioner can tell you which of your costs count.
The figures for the 2027 tax year
The 2027 tax year runs from 1 March 2026 to 28 February 2027. For individuals in that year:
- The primary residence exclusion is R3 000 000. It was R2 000 000 before. Reports say the higher figure applies to sales from 1 March 2026. The date that counts can depend on your sale agreement, so check yours if the sale is close to that date.
- The annual exclusion is R50 000, which applies to your total gains for the year.
- 40% of the remaining gain is added to your taxable income.
- The maximum effective rate is 18%.
The 18% comes from the top rate on income of 45% applied to the 40% that is included. Your own rate may be lower, because the included gain is taxed at your marginal rate along with your other income.
A worked example
This is an example only. Say you sell your home and your gain is R3 500 000.
- Take off the R3 000 000 primary residence exclusion. R500 000 is left.
- Take off the R50 000 annual exclusion. R450 000 is left.
- Include 40% of that. R180 000 is added to your taxable income.
The tax on that R180 000 depends on your other income. At the top rate it would be R81 000, which is 18% of R450 000. A smaller gain gives a smaller result. If your gain is R3 000 000 or less, nothing is left after the primary residence exclusion, so there is no tax from the sale.
When the exclusion may not apply fully
The exclusion is for a primary residence, meaning the home you actually live in as your main home. It may not cover you fully if:
- the property is a rental or a second home;
- part of the property is used for business or rented out;
- the property is held in a company or trust;
- you buy and sell homes regularly to make a profit, in which case SARS may treat the profit as income, not a capital gain.
The rules on these cases have detail, so speak to a tax practitioner. The same goes for a sale on the death of an owner, or a home that was used as both a residence and a rental. On a rental property, improvements can be added to base cost for CGT, even though they cannot be deducted from rental income.
How you report it
You declare the sale in your income tax return for the year in which it happens. SARS then works out the tax with your other income. Keep your records, such as the original purchase documents, invoices for improvements and the sale agreement, for as long as the tax rules require. Ask your tax practitioner how long.
If you expect a bill, set money aside from the sale proceeds, because SARS will assess you after the return is filed.
What to do next
- Find your original purchase price and the costs of buying.
- List improvements, with invoices where you have them.
- Estimate your gain and compare it with the R3 000 000 exclusion.
- If the property is not your main home, or your gain is large, ask a tax practitioner before you sign.
The capital gains tax calculator gives a quick estimate. To plan the sale itself, read how to sell your house privately and estate agent commission explained.
This article is general information for South African readers, not legal, financial or tax advice. Rules and rates change, so check your own situation with an attorney, your bank or a tax practitioner. Our property calculators can help you work out the numbers.