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Allowable deductions from rental income

Posted 12 January 2016 under Tax Questions



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RBB says:
11 January 2016 at 22:16

I did some renovations to a rental property between tenants. I replaced the carpet with tiles, replaced all the kitchen cupboards and the oven, and repainted. All of these renovations were specified in my rental contract with the new tenant - she viewed the unit before the renovations, and we agreed that they would be carried out before she took occupation. Which costs can I deduct as expenses in the production of the rental, or must I add all of the costs to the base cost of the property for purposes of the CGT calculation once I sell?

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TaxTimTaxTim says:
12 January 2016 at 12:13

"Repairs and maintenance" expenditure should be written-off in the year incurred, while "improvements" should be added to the case cost of the asset (i.e. capitalised).

Repairs and maintenance are amounts that that are spent to "fix" or repair existing structures or features, while improvements are things whereby there is a change or extra feature added that would increase the income earning capacity. So for example, fixing the roof vs adding an extra room. You would need to very carefully work out which is which, (ie renovations vs improvements).

From what you have described, it sounds like this expenditure is repairs and maintenance to be written-off in the year incurred. Remember to keep all the invoices in case SARS requests support.

Please also read our blog on Rental property deductions


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