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CAPITAL GAIN TAX ON A HOUSE

Posted 20 October 2015 under Tax Questions



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BUDDY says:
15 October 2015 at 22:12

As a private taxpayer, you letting out a house of yours for 7 years. Then you decide to live in the house yourself ( I believe the house then becomes you primary residence. ). For example, after 2,3 or even 7 years,you decide to sell the residence. With Capital gain tax in mind,do SARS handle it as normal CGT on a primary residence or because that you have letting it out, is there a special formula when culculate your liability for CGT on the house. I own more tha n one house..

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TaxTimTaxTim says:
16 October 2015 at 14:59

You would apportion the total capital gain between the period you used the residence for your home and the rental period. The primary residence exclusion would then apply to the portion of the gain pertaining to your primary residence period. You would always pay full CGT on the portion of the gain applicable to the period you let it out.

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BUDDY says:
18 October 2015 at 21:22

If I bought a house in 2002 for R800 000(Base cost). I then letting it out for 11 years and 6 month. After the tenant moved out,i used the residence for my home(primary residence).for 1year 2 month and I sold it in April 2015 for R3 1 000 000(THREE POINT ONE MILLION-PROCEEDS). Can you calculate the total gain apportion for the period I used it for my home and the period I have let it out. My annual taxable income= R320 000


TaxTimTaxTim says:
20 October 2015 at 21:31

The total number of months you owned the house equals 152 months.
Period of letting = 138 months
Period of primary residence = 14 months
Total Gain = R3,1m - R800,000 = R2,300,000

Primary residence portion = 14/152 X R2,300,000 = R211,842
R211,842 - R2,000,000 (primary residence exclusion) = nil

Non-primary residence portion = 138/152 X R2,300,000 = R2,088,158
Capital gain less annual exclusion of R30,000 = R2,088,158 - R30,000 = R2,058,158

33,3% X R2,058,158 = R685,366
Total taxable income = R685,366 + R 320,000 = R1,005,366

Tax you will pay / PAYE (Pay As You Earn) for your income bracket: R 319,997.06 (as per PAYE tables provided by SARS)


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