Home-based businesses

Home-based businesses and capital gains.

Whether you want to sell your residential property or buy a new real estate investment, a house or an apartment, your Property Angel is here to help you find your dynamic home.

Property Angels – Success Together

Burman says if a homeowner carried on a profitable business from the property and has claimed a portion of household expenses against his income earned in this regard, then the gain from the property must be split between the portion that relates to the business and the portion that relates to the primary residence.

Only the latter may be offset by the R2 million primary residence exclusion.

For example:

Susie has set up a room in her home from which to run her consulting business. This room comprises 15% of the floor space of the house. She sells this property and makes a capital gain of R 1.5 million. Ordinarily, if she had not carried on a business from her home, there would be no tax implications on this disposal as the gain falls below the R2 million exclusion, says Burman.

However, in this case she will be taxed on the portion that relates to her business.

Therefore she will need to declare a capital gain of R225 000 (15% of R 1.5 million).

From this she can deduct the annual exclusion to arrive at a net gain of R 185 000.

This will result in an amount of R74 000 being included in her taxable income to be taxed at her marginal rate.

Burman says the above scenario should not discourage a homeowner from deducting home office expenses.

That is, when they carry on a business from home as the tax savings to be gained from the deductions over the years will usually exceed any capital gains tax liability that will arise in the future.

Author: Jeremy Burman

Did you know? Your own personal Attorney Realtor offers an all inclusive service. You will receive legal advice, sales and purchase solutions, as well as the entire transfer process.

Get your real estate selling or buying process on the right track by contacting Property Angels today. Your professional local Attorney Realtor will then call you back the same day or the next business day.

At Property Angels we introduce home sellers and buyers to their own dedicated Attorney Realtor Partner.

Once your friendly Attorney Realtor has highlighted all your benefits, you will understand why an Attorney Realtor is the smartest way for you to sell or buy your property.

Property Angels – Success Together