SARS allows for a special tax deduction specifically on residential property, called a Section 13Sex deduction.
Tax Write-offs of up to 55%
The tax write-offs obtainable through Section 13sex come into effect when property investors buy a minimum of five residential units for rental. Purchasers are then able to off-set their investment by depreciating the cost of the units at an accelerated rate of 5% a year over 20 years.
SARS created the Section 13sex legislation specifically to incentivise the investor market to encourage developers to build buy-to-let properties aimed at providing much needed housing for people in the middle income market, most of whom cannot afford to buy their own homes.
Consider a buyer with a gross monthly income of R120 000 who invests in five units at a total cost of R2.9 million. With a 90% mortgage, the initial deposit amounts to R285 000.
Without Section 13sex, the monthly cost for these five units would be R7 800. However, Robertson says the accelerated depreciation allowance brings down the buyer’s tax bill to R6 300 a month, making the effective cost R1 500 a month. That’s a significant saving of over 80%.
Enquire about Section 13sex, we will call you back!
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