House/Tax Advice...

[DCTrader]

Let's say you buy a place... your first house. You don't move into it but rent it out for the first 2 years while staying in your current rental as a tenant. Would it be best to designate this new house as your primary residence? If not, you could claim the bond repayments as a tax deduction but then would have to include rental in your taxable income. If you designate it as your primary residence then SARS will pick up the rental flowing into your account and you'll pay tax on it anyway. After 2 years you move into the place... would it then be possible to have a change of intention and designate it as your primary residence? Thanks

[samoa]

Will you be able to claim the rent of the dweeling you yourself stay in together with the bond for your own house?

[DCTrader]

No... that's pure living expenses outside of the trading side of things... The question is whether SARS would accpet a change of intention 3 yrs from now when I move into the place...

[cfm]

I have found that emailing SARS with questions like this normally results in a quick response from them. Otherwise get professtional advise. Most people on this site would be guessing and are probably not tax consultants or advisors.

[Captain_Kidd]

Yes the bond repayment is an expense set off against your rental income recieved, the only part that is tax deductable will maybe be your interest charged on the bond. As far as primary residence goes, that is the residence that you stay in.

[#6]

It would not be possible to designate it your primary residence unless you or your spouse uses it primarily for household purposes (ie >50%). There are some exceptions for tempory absenses, but none would apply in the case where you bought the house and moved in later. Should you really move in later, you will be allowed a primary residence exclusion upon later sale, but the capital gain that qualifies for this exclusion will be time-apportioned and only the part of the profit that relates to the time you acutually used the house as a primary residence can be reduced by the primary residence exclusion. The rest of the capital gain will be fully taxable (although there is always the annual exclusion that is R15000 for the 2008 tax year).

[#7]

Sorry for the double answer, here's the short answer: you will be able to designate it your primary residence if you move in later.

[#8]

Ok, so you drop SARS a mail and five minutes later the doorbell rings :^)