1. How Rental Income Is Taxed
There is no separate "rental tax" in South Africa. Rent you receive is added to your other income, such as your salary, and the total is taxed at your normal marginal rate. For 2026/2027 those rates run from 18% to 45%.
What gets taxed is your net rental income: the rent you received in the tax year minus the expenses you incurred to earn it. A property that brings in R120,000 of rent but costs R100,000 to run adds R20,000 to your taxable income, not R120,000.
What counts as rental income
- Monthly rent from tenants
- Amounts tenants pay you for extras such as parking, water or electricity recoveries
- Any part of a deposit you keep, for example to cover damage or unpaid rent
A deposit you hold and later refund is not income. It only becomes income in the year you keep it.
2. Expenses You Can Deduct
An expense is deductible if you incurred it in producing the rental income and it is not capital in nature. For a property let out for the whole year, the usual deductions are:
| Expense | Deductible? | Notes |
|---|---|---|
| Bond interest | Yes | Only the interest part of each instalment, not the capital repayment |
| Municipal rates and taxes | Yes | If you pay them, not the tenant |
| Sectional title levies | Yes | Normal levies; special levies for improvements may be capital |
| Building insurance | Yes | Your own home contents cover is not deductible |
| Letting agent and management fees | Yes | Including tenant-finding commission |
| Advertising for tenants | Yes | |
| Repairs and maintenance | Yes | See section 4: repairs yes, improvements no |
| Garden services, security, cleaning | Yes | If you pay for them as landlord |
| Utilities you pay on the tenant's behalf | Yes | If you also declare the recoveries from the tenant as income |
| Furniture and appliances (furnished let) | Over time | Claimed as a wear-and-tear allowance over the periods SARS sets in Interpretation Note 47 |
If the property is only let for part of the year, or you use it yourself for some of the time, you can only deduct the share of the costs that relates to the letting period.
3. Expenses You Cannot Deduct
- Capital repayments on the bond. Only interest is deductible.
- The purchase price, transfer duty and conveyancing fees. These are capital costs. They are added to the base cost of the property and reduce your capital gain when you sell.
- Improvements, like a new room, a swimming pool or upgraded finishes (see section 4).
- Costs for periods when the property is empty and not available to let, or when you or your family live in it.
- Interest on money borrowed for something else, even if the loan is secured by the rental property. If you re-borrow on the rental bond to buy a car, that interest is not a rental expense.
4. Repairs vs Improvements
This is the line SARS checks most often.
- A repair restores something to its original condition: fixing a leaking geyser, repainting walls, replacing broken tiles with similar ones, fixing a gate motor. Repairs are deductible in the year you pay for them.
- An improvement makes the property better than it was: adding a bathroom, replacing a basic kitchen with a much better one, installing a solar system, building a carport. Improvements are not deductible against rent. They are added to the property's base cost for capital gains tax.
Repairs to a property you have just bought, to fix damage that existed before you bought it, are usually treated as part of the cost of buying it, not as deductible repairs.
5. Worked Example: a Buy-to-Let Flat
Ayesha owns a flat she lets to an unrelated tenant for R9,000 a month for the full tax year.
| Item | Amount for the year |
|---|---|
| Rent received (12 × R9,000) | R108,000 |
| Bond interest (interest portion only) | −R60,000 |
| Levies | −R18,000 |
| Rates | −R9,600 |
| Letting agent (10% of rent) | −R10,800 |
| Building insurance | −R3,600 |
| Repairs (geyser element, repainting) | −R4,000 |
| Net rental income | R2,000 |
Ayesha adds only R2,000 to her taxable income. Her bond's capital repayments are not deducted, so the property costs her more in cash each month than the tax return shows. That is normal: she is building equity, and the capital is not a tax expense.
To see the cash flow and yield on a property like this, use our rental yield calculator.
6. Rental Losses and Ring-Fencing (Changed From 1 March 2026)
If your deductible expenses are more than your rent, you make a rental loss. Normally that loss reduces your other taxable income, such as your salary, which lowers your PAYE bill when you file your return. A R22,000 rental loss saves someone in the 36% bracket about R7,920.
Section 20A of the Income Tax Act can stop this. When it applies, the loss is ring-fenced: you cannot set it off against your salary. It is carried forward and can only be used against future profits from the same rental.
When ring-fencing applies
Two conditions must both be met:
- Your income is high enough. Your taxable income, before taking off the loss, must reach the level where the specified marginal rate starts. Until 28 February 2026 this was the top rate of 45%. From the 2026/2027 tax year (years starting on or after 1 March 2026), the Taxation Laws Amendment Act, 2026 lowered it to the 39% rate, which starts at R695,801 of taxable income.
- The rental looks like a loss-making activity. Either you have made a loss from the rental in at least three of the last five years (including this one), or the letting is a "suspect trade". Letting residential accommodation is a suspect trade unless at least 80% of it is used by people who are not your relatives for at least half the year.
Even if both conditions are met, you can still escape ring-fencing if you can show the rental has a reasonable prospect of making a profit within a reasonable time. That escape is not available for suspect trades with losses in six or more of the last ten years.
7. Airbnb and Short-Term Letting
Income from Airbnb, Booking.com or other short-term lets is taxed the same way: net income added to your other income. The deductions are similar, plus platform commission, cleaning between guests, linen, consumables and the extra utilities you pay.
Two differences matter:
- If you also use the property yourself, you must split costs between the days it was let or available to let and the days you used it.
- Short-term accommodation can count as "commercial accommodation" for VAT, unlike long-term residential rent, which is VAT-exempt. If your short-term letting turnover is large, check the VAT registration rules in our VAT guide.
8. Letting Part of Your Own Home
If you let a granny flat, cottage or room in the home you live in, you are taxed on the rent minus the share of expenses that relates to the let part. A common basis is floor area: if the cottage is 20% of the property, you can deduct 20% of the bond interest, rates and insurance, plus all costs that relate only to the cottage.
There is a capital gains catch. The R3 million primary residence exclusion only covers the part of the property you live in. If 20% has been let out, part of the gain when you sell may be taxable. Keep a record of the letting periods and the area let.
9. Provisional Tax, Records and Your Return
Rental income has no PAYE taken off, so landlords are usually provisional taxpayers and must make payments in August and February. You are only excluded if you have no business income and your taxable income from rent, interest and foreign dividends is R30,000 or less (or your total taxable income is under the tax threshold). Our provisional tax guide explains the deadlines and penalties.
On your ITR12 you declare rental income and expenses in the local rental income section. Keep these for at least five years after you file:
- The lease and a record of rent received each month
- Your bond statement showing interest separately from capital
- Invoices for every repair, levy, rates bill and agent fee
- Records of any periods the property was empty or used by you
10. Capital Gains Tax When You Sell
When you sell a rental property, the gain is subject to capital gains tax. Your base cost is the purchase price plus transfer costs plus improvements. The gain is reduced by the R50,000 annual exclusion for 2026/2027, and 40% of what is left is added to your taxable income. The maximum effective rate for individuals is 18%.
A buy-to-let property does not get the R3 million primary residence exclusion, because you do not live in it. Use our capital gains tax calculator to estimate the tax before you sell, and see our property buying guide for the costs on the way in.
Run the Numbers on Your Rental
Work out gross and net yield, monthly cash flow and buy vs rent with our free rental yield calculator.
Open Rental Yield Calculator →Frequently Asked Questions
Is rental income taxed separately in South Africa?
No. Net rental income (rent minus deductible expenses) is added to your other income and taxed at your normal marginal rate, which runs from 18% to 45% for 2026/2027.
Can I deduct my bond repayment on a rental property?
Only the interest part. The capital you repay is not deductible. Your bond statement shows the interest separately.
Can a rental loss reduce the tax on my salary?
Usually yes. But from 1 March 2026, section 20A can ring-fence the loss if your taxable income reaches the 39% bracket (R695,801 for 2026/2027) and the property has made losses in three of the last five years, or is let mostly to relatives.
Is a deposit from a tenant taxable?
Not while you hold it to refund later. Any part you keep, for example for damage or unpaid rent, becomes rental income in the year you keep it.
Do I have to pay provisional tax on rental income?
Usually. You are only excluded if you have no business income and your taxable income from rent, interest and foreign dividends is R30,000 or less, or your total taxable income is under the tax threshold.
Sources
Every figure on this page was checked against these official sources on 19 October 2026:
- Taxation Laws Amendment Bill B30-2025, clause 19 (section 20A), enacted as Act 5 of 2026
- SARS: Guide on the ring-fencing of assessed losses (section 20A)
- SARS: Rates of tax for individuals (2027 tax year)
- SARS: Provisional tax
- SARS: Capital gains tax rates and exclusions