Tips with tax ...

Discussion in 'The Sump' started by ZeroCool, 10 Sep 2009.

  1. ZeroCool

    ZeroCool

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    Hi everyone, as everyone knows, who are a tax payer, it is that time again.

    Nr1, I am renting out a house, and getting rental income. My income and deductions doesn't even match up.

    I thought the best way would be, nr 1, take all the money in my home loan, invest that. Then i will pay interest on my home loan again.

    And secondly, up my RA.

    Any suggestions what can I else do ?

    I know i would pay tax on the interest received from the investments (if they lie in a bank account !)
     
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  3. FransSny

    FransSny

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    Zero am I correct in assuming your rental is a second income ?
     
  4. ZeroCool

    ZeroCool Thread Starter

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    That is 100% correct. The thing that i want more info of, how can i minimize the total owing to SARS at the end of the day.

    I know I can take all the money, prepaid into the bond, and invest that.
    Or up my RA ... that is another thing i know i can do.

    Is there anything else ?
     
  5. FransSny

    FransSny

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    Cool Zero here's my take on it and I'm not a Tax consultant

    Remember rental falls under the gross income definition so you cant hide it. You can however deduct expenses such as interest incurred on the bond, normal running costs such as rates and taxes, normal wear and tear etc.

    Upping your RA is also a good idea, just remember it is capped
     
  6. ZeroCool

    ZeroCool Thread Starter

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    Thanks for the quick reply, yes, i know you can't hide it.

    Let me explain a bit more in detail.

    I am renting out my house. So, my tax for his year (2008/2009) must also show the rental income. I rented my out out for 4 months in that season, to call it a season.

    Now, I don't have much of a bond left, so there isn't really interest.

    So, if i subtract all my prepaid money, i will have a bond again. And because of that, i will pay interest, which is deductable from the income. hope that clearifies the picture.

    Jip, and I know the RA is capped as well !

    Any expenses can be deduckted, but what more can i do, to score at the end of the day ...

    I took a change by posting it in here ... hope some CA's read this :)
     
  7. FransSny

    FransSny

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    MMMM makes the picture bit different if you dont really have a bond left but this is what I understand . It will always stay an income, no matter what youve done with it as you funded something

    but lets see what the gurus say
     
  8. ZeroCool

    ZeroCool Thread Starter

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    ok. so know you have a better picture.

    so, i have a bond of lets say R3000, and I pay R2500 interest, and only R500 capital, that R2500 can be deducted from the income. Lets say R5000. So, I will only be taxed on R2500, and if there are more expenses, i can deduct that as well.

    Currently, the picture is, my income outway my expenses with a large margine.

    So, i was thinking of taking all the money out of my bond, and have a bond payment again.

    Yes, I know it will always be income, but what I am trying to explain, how can i keep the amount taxable to a minimum.

    holding thums ... guru's where are you guys !

    some must love fish and numbers, lol !
     
  9. FransSny

    FransSny

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    You are quite correct Zero

    Taking the money out and re investing is an option, you will however have to calculate the savings wrt tax vs interest earned and paid. And you will be taxed in the end as well on the interest earned.
    Also SARS will only give you 3 yrs (if I remeber correct) to run at a "loss'.

    I am following this with interest as I will be sitting in the same situation soon and havent pondered this. Would love to give my auditors a call but they will charge me for the advice :p
     
  10. ZeroCool

    ZeroCool Thread Starter

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    glad you are now with me.

    What i am trying to figure out, is it best to get taxed on the income, or trying to write it off ?

    Yes, currently, we have a capped interest maximum of R19000 of the season (2008/2009)
     
  11. FransSny

    FransSny

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    Feel your pain dude...will follow this with interest , wasnt too high on my priority list as my plans are still a few months off
     
  12. ZeroCool

    ZeroCool Thread Starter

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    someone now told me, that is stupid to take all my money out of my bond, because only a % of the interst can be deducted. Will confrim that.

    Well, for now, think i will just save all the rental income, get interest on that, and pay my dues when needed on the extra income.

    Secondly, think i will up my RA ....
     
  13. wiesnerm

    wiesnerm

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    I am not a tax consultant and not a tax guru, but I have a rental property that I am claiming back from SARS. You can claim the full interest paid on the bond that is registered against that specific property, as well as levies, rates & taxes, etc.

    Before deciding to do anything you must work out the nett effect of what you are doing. Pointers to keep in mind:
    - The amount of tax that you will save is dependant on the tax bracket that you fall in (the marginal rate)
    - The interest that you will earn on the investment will be lower than the interest that you pay on the bond

    Hope this makes sense.
     
  14. ZeroCool

    ZeroCool Thread Starter

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    Thanks for the input.

    The trouble that i am having currently, my income outweigh my expenses. I don't have a bond at all. Lukcy, but also not lucky in another way.

    Some say, up my RA ... some say, take the money from my bond, and buy another house. That sounds good, but needs planning.

    Everything needs planning, but I know this ain't a fast solution. but I know if i take the money and invest it, my return will be lower than what i am paying.

    thanks for the input !
     
  15. ZeroCool

    ZeroCool Thread Starter

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    Are the any tax practioners on here, that might lend a hand regarding tax returns via efiling ...

    please help !
     
  16. mnd123

    mnd123

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    Dude, get a trax person, they charge like R350 for the year and the savings can be massive
     
  17. ZeroCool

    ZeroCool Thread Starter

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    that is what i was trying to ask for ... someone who can help me with my tax return.

    I completed mine, but i need changes to it to be done.

    So, if there is anyone out there in jhb (sandton / edenvale area) ... shout !
     
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