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Tax on rental income: what landlords should know
Rent you receive is added to your other income and taxed at your normal rate. You may deduct the costs of earning that rent, which cuts the amount taxed. A rental loss is not always something you can set against your salary, and a sale can bring capital gains tax. This guide covers the main points. A tax practitioner should check your own position.
Rent counts as income
If you let a house, flat, room or granny flat, the rent is taxable income. You declare it on your tax return with your other income, such as salary. You do not pay a separate tax on rent. The total is taxed at your rate for the year.
Keep a record of every rent payment and every cost. SARS may ask to see them. Ask a tax practitioner whether you also need to pay provisional tax, which is tax paid in advance during the year on income that is not taxed at source.
What you can deduct
You may deduct expenses incurred to produce the rent. SARS lists these examples:
- Rates and taxes.
- Interest on the bond.
- Levies, if it is a sectional title unit.
- Repairs to the part you let.
- Agent fees and advertising.
- Homeowner’s insurance.
- Garden services and security.
Only the interest on your bond counts. The part of the instalment that repays the capital does not. Private costs do not count either, such as repairs to a part of the home you use yourself.
If you let only part of a property, for example a room or a cottage, you apportion the costs. The usual method is by floor area. If a quarter of the floor area is let, you deduct about a quarter of the shared costs.
Improvements are different from repairs. A repair puts something back as it was. An improvement, such as adding a room, cannot be deducted against rent. It can be added to the property’s base cost for capital gains tax, which reduces your gain when you sell. Keep the invoices.
When a rental makes a loss
If costs are higher than rent, you have an assessed loss. In general, you can set it against your other income, such as salary, and reduce your tax. There is an exception, called ring-fencing. Under section 20A of the Income Tax Act, for natural persons, a loss from certain trades can be set only against income from that same trade, and the unused loss carries forward.
Residential letting is one of these listed trades unless at least 80% of the property is used by people who are not your relatives for at least half the year. A test of three losses in five years also applies. From the tax years starting on or after 1 March 2026, ring-fencing applies to people whose marginal tax rate is 39% or higher, rather than only those at 45%, so more landlords may be affected. We have not given the income threshold here, so check the current figure with SARS or a tax practitioner.
Capital gains tax when you sell
When you sell a rental property for more than it cost, the gain is subject to capital gains tax. The big exclusion that homeowners enjoy, R3 000 000 on a primary residence for the 2027 tax year, applies to your home and not to an investment property. For individuals, the annual exclusion is R50 000, and 40% of the remaining gain is added to taxable income. The maximum effective rate is 18%.
Your base cost includes what you paid, transfer costs and improvements. The capital gains tax calculator gives an estimate. If you have lived in the property as well as let it, or let only part of it, ask a tax practitioner how the exclusion applies. The article on capital gains tax when selling your home sets out the basics.
What to do next
- Open a separate bank account for rent and costs, so records are tidy.
- Keep invoices, statements and receipts for every deductible cost.
- Note the date you bought, the price and what you spent on improvements.
- Ask a tax practitioner about provisional tax and ring-fencing before you file.
- Work out your return before tax with the rental yield calculator, and read buy-to-let: does it pay before you buy.
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.