Being married in community of property and how this affects your tax!

CH Consulting |
15 May 2024
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Marriage not only binds two individuals together in a personal union but also carries significant legal and financial implications, particularly regarding tax. Understanding the tax effects of being married in community of property is crucial for couples to manage their finances effectively and optimize tax planning.

In this context, it’s essential to explore how this marital regime impacts income tax, capital gains tax, donations tax, and other relevant tax considerations. By delving into these intricacies, couples can navigate the complexities of the tax system with clarity and ensure compliance while maximizing potential benefits.

When married in community of property, half of your own, and half of your spouse’s interest, dividend, rental income and capital gains are taxed.

Interest

It’s important to note that, whether you or your partner are earning local or foreign interest, you will both be taxed. For example, if your partner has a savings account in their name, you will be obligated to pay 50% of the taxes required on that account.

Dividends

Similarly, if you are earning dividends, due to being married in community of property, your partner will be liable for half of the taxes; and vice versa.

Rental Income

Another example is rental income. If the property is in one partner’s name, both parties will be taxed 50%, regardless of who receives the income. For instance, should the annual rental income received be R120 000, R60 000 will be added to each partner’s taxable income for their income tax submission.

Capital Gains Tax

In community of property marriages, both spouses are considered joint owners of assets. This can have implications for capital gains tax (CGT) when assets are sold. CGT is calculated based on the profit made from the sale of an asset, and each spouse is responsible for half of the CGT liability on the profit.

Takeaways

It’s important for married couples to consult with a tax professional to fully understand the implications of their marital property regime on their tax obligations and to ensure they are maximizing any available tax benefits. Additionally, tax laws and regulations may change over time, so it’s essential to stay updated on any developments that may affect tax planning strategies.

    You are welcome to book a call if you want us to consult on your specific circumstances or complete your calculation and return on your behalf.

    You can also email us at info@chconsulting.co.za if you have any questions; or check out our Google Reviews to see what other customers have experienced when working with us.