South Africa Rental Income Tax Guide

Taxation of Rental Income

Rental income from immovable property is included in the landlord's gross income and taxed at progressive individual income tax rates ranging from 18% to 45% for the 2026 tax year. The full amount of rent received (or accrued) must be declared, regardless of whether the property is residential or commercial. If the property is owned jointly (e.g., with a spouse or business partner), each owner declares their share of the rental income proportionate to their ownership interest.

Rental income can push a taxpayer into a higher marginal tax bracket, so landlords should carefully consider the net rental profit after deductions. Losses from rental activities (where allowable deductions exceed rental income) can generally be set off against other income (such as salary or business income) in the same tax year, reducing the overall tax liability. However, SARS may scrutinise rental losses sustained over multiple years to determine whether the activity is carried on with a profit motive.

Allowable Deductions

Landlords can deduct all actual expenses incurred in the production of rental income. Common deductible expenses include:

Bond interest: Interest paid on a mortgage bond secured against the rental property is fully deductible. Only the interest portion is deductible, not the capital repayment component.

Rates and taxes: Municipal property rates, refuse removal, sewage, and other local government charges are deductible.

Maintenance and repairs: Costs of maintaining the property in its existing condition (painting, fixing plumbing, replacing broken windows) are deductible. Improvements (adding a room, renovating the kitchen to increase value) are capital in nature and not deductible — they are added to the cost base for CGT purposes.

Insurance: Building insurance premiums and landlord insurance are deductible.

Agent fees: Letting agent commissions and property management fees are deductible.

Other expenses: Legal fees for tenant evictions, accounting fees for preparing rental income schedules, advertising costs to find tenants, body corporate levies (for sectional title properties), garden services, security, electricity and water (if paid by the landlord), and travel expenses directly related to managing the rental property.

Depreciation and Capital Allowances

Residential rental properties do not qualify for depreciation (wear-and-tear) allowances on the building structure itself. However, movable assets used in the rental property (furniture, appliances, curtains, carpets) qualify for a wear-and-tear deduction over their expected useful lives (typically 3 to 6 years depending on the asset). SARS allows a write-off period of 6 years for furniture and fittings under Interpretation Note 47.

Commercial rental properties may qualify for a capital allowance under section 13 of the Income Tax Act, allowing a 5% per year deduction on the cost of buildings used in a trade. Industrial buildings may qualify for a 10% per year allowance under section 13quat. These allowances are available only to taxpayers who own commercial or industrial buildings and use them for business purposes (including leasing to tenants for business use). Residential rental properties do not qualify for building allowances.

Capital Gains Tax on Property Disposal

When a rental property is sold, the capital gain (selling price less base cost less selling costs) is subject to capital gains tax (CGT). For individuals, 40% of the capital gain is included in taxable income and taxed at marginal rates, giving an effective CGT rate of 7.2% to 21.6% depending on the individual's marginal income tax rate. The primary residence exclusion (up to ZAR 2 million of gain) does not apply to rental properties, as they are not the taxpayer's main home.

If the rental property was previously the taxpayer's primary residence and was later rented out, the capital gain must be apportioned between the period of primary residence (exempt up to ZAR 2 million) and the period of rental use (taxable). The apportionment is typically done on a time-basis or, in some cases, a value-basis supported by a sworn valuation at the date the property ceased to be the primary residence.

Rental Income Tax Example