Primary Residence Exclusion

Primary Residence Exclusion

Certain exclusions within the Income Tax Act provide for some tax relief

This is when it comes to the disposal of a primary residence by a natural person, says Burman.

Where the selling price of the property is less than R2 million the entire capital gain or loss must be excluded for tax purposes.

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The Act also provides that the first R2 million of a capital gain or loss on disposal of a primary residence must be disregarded.

Where a property is jointly held, such as in the case of a married couple, the gain as well as the R2 million exclusion must be shared equally by the owners.

Example:

Mr and Mrs Smith dispose of their house with a base cost of R3 million for a selling price of R5.5 million.

The capital gain will be equal to R 2.5 million. After deducting the joint R2 million exclusion they will be left with a net gain of R500 000. They will each then include R250 000 of this gain in their return.

Individual taxpayers are also currently entitled to an annual general capital gain exclusion of R40 000.

Author: Jeremy Burman

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