How much capital gains tax will I pay when I sell my home?

Overview

  • you may need to pay capital gains tax when you sell your home (“primary residence”) for a profit in South Africa
  • profit = amount of money you get when selling less cost of buying the house plus any renovations
  • you only pay tax if your profit is more than R2 million
  • the R2m exclusion only applies to one home. If you sell a second home or holiday home, the R2m is not applicable.
  • the maximum CGT tax rate you will pay is 18% - if you are in the highest income tax bracket

The simple formula and CGT calculator for your home

Here is the simple formula and calculator to work out how much capital gains tax you will pay when you sell your home in South Africa.

The Formula
Tax you will pay = (Profit - R40 000) x 40% x Marginal Income Tax Rate
Capital Gains Tax Calculator when selling your home
I currently earn (Rands) per year
Here is how much tax you will pay
= [(R2.5m - 40.0k) x 40%] x Marginal Income Tax Rate
= R964.0k x 36.0%
= R347.0k
R1.0k = tax you need to pay based on a R2.5m profit.

Will you need to pay capital gains tax when selling your home

  • if you made more than R2 million profits

What is a “primary residence”?

  • it is the home you primarily live in
  • you must own or have partial ownership of your home (e.g join ownership with your partner)
  • your holiday house is not your home and when you sell this property the R2m exclusion does not apply

How to calculate capital gains tax when selling your home in South Africa

Step 1. Calculate your base cost.

  • original cost of of purchase plus renovations and improvements made to your home

Step 2. Determine the profit

  • Profit = Sale amount less base cost

Step 3. Calculate your capital gains tax

If you made less than R2m profit,

  • no need to pay any capital gains tax on your home

If you made more than R2m profit

  1. Deduct R40 000 (“annual capital gains exclusion”) from your profits
  2. Multiply by 40% (“the inclusion rate”) of your profits
  3. Multiply by your marginal income tax rate

Summary

  • SARS may tax you when you sell your home
  • However, only profits over R2m are taxable
  • Profits = Sale proceeds less what you paid for your home + any renovations
  • Capital gains tax applies for the amount of profits over R2m
  • The amount of CGT you end up paying is linked to how much you earn
  • The annual exclusion of R40k still applies
  • Here is the formula: CGT on primary home = ((Profits over 2m) - R40k) x 0.4% x Marginal income tax rate
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