Selling Your Home: The R3 Million Exclusion, and the R2 Million One It Gets Confused With

If you sell the home you live in, the first R3 million of the capital gain is disregarded.

That figure is worth stating plainly, because the page most people find when they search for it says R2 million — and it is out of date. SARS's own capital gains rates page, updated in February 2026, puts the primary residence exclusion at R3 000 000 gain or loss for the 2026 and 2027 years of assessment. Its older guidance page still carries the previous R2 million figure and frames it for the 2018 and 2019 years.

A million rand of exclusion is not a rounding error. On a large gain it is the difference between a comfortable sale and an unexpected tax bill, so it is worth understanding which number does what.

Two different figures, two different jobs

There are two separate reliefs here and they are constantly conflated.

The gain exclusion — R3 million. The first R3 million of the capital gain or loss on disposal of your primary residence is disregarded. It applies to the gain, not to the selling price.

The proceeds concession — R2 million. Separately, you may disregard the capital gain entirely where the proceeds do not exceed R2 million. This one looks at what the property sold for rather than what you made on it.

The practical value of the second is administrative. If you sold for R2 million or less, the gain falls away without your having to establish a base cost at all — which spares you reconstructing what you paid, plus improvements, plus costs, possibly decades later.

Note that the two moved independently. The gain exclusion rose to R3 million; the proceeds concession stayed at R2 million. They are not the same rule at different sizes.

What the arithmetic looks like

Start with the gain — the selling price less the base cost — then apply the exclusions in order.

A gain of R2.5 million. Entirely within the R3 million exclusion. Nothing is taxable.

A gain of R4 million. R3 million is disregarded, leaving R1 million. The annual exclusion of R50,000 then comes off, leaving R950,000 as the capital gain taken into account. At the maximum effective rate for individuals of 18%, that is up to R171,000 in tax.

Proceeds of R1.9 million. The gain is disregarded under the proceeds concession, and you do not need to compute the base cost.

That 18% is a maximum effective rate, reached at the top marginal rate. Someone whose income sits lower on the table pays proportionally less, so treat R171,000 as the ceiling on that example rather than the certain outcome.

What counts as a primary residence

The definition is more generous in some respects than people expect and narrower in others.

A residence is a structure used as a place of residence — and SARS expressly includes a boat, caravan or mobile home. It must be owned by a natural person or a special trust, and the owner or their spouse must ordinarily reside in it and use it mainly for domestic purposes.

"Ordinarily reside" is doing real work in that sentence. A property you own but do not live in is not a primary residence, whatever your intentions for it.

The two hectares, the letting rule, and the home office

Three qualifications catch people out, and all three are worth checking before you assume the full exclusion applies.

Land is capped at two hectares. The exclusion covers the residence together with a maximum of two hectares of land used for domestic or private purposes. On a smallholding or a large plot, the portion above that is outside the exclusion.

Letting is allowed, within limits. A residence is treated as used for domestic purposes during a continuous absence if it was let for not more than five years, provided you occupied it continuously for at least a year before the absence and at least a year afterwards. That is the provision that protects people posted elsewhere for a period — but the conditions are cumulative, and a let that runs past five years, or an absence not bookended by occupation, falls outside it.

Trade use is carved out. The exclusion does not apply to the part of a primary residence used for carrying on a trade. So a dedicated home office or consulting room claimed as business premises reduces the sheltered portion proportionally.

That last one deserves a moment's thought, because it interacts with something people do for good reasons. Claiming home-office expenses against your income tax may reduce the part of your eventual gain that the exclusion covers. Neither choice is wrong, but they should be made knowingly rather than discovered at sale.

The base cost is bigger than the purchase price

Because every exclusion here applies to the gain, the number that decides your exposure is the base cost — and people routinely understate it, which inflates the gain and the tax with it.

The base cost is not simply what you paid. It generally also takes in the costs of acquiring and disposing of the property, and money spent improving it:

• Transfer and conveyancing costs on the way in.
• The estate agent's commission on the way out.
• Capital improvements — an added room, a new roof, a garage, a wall, solar installation.

The distinction that matters is improvements versus repairs. Replacing a broken pane of glass maintains the property; enclosing a stoep changes it. Improvements generally form part of the base cost. Ordinary repairs and maintenance generally do not.

The practical consequence is dull and valuable: keep the invoices. Twenty years of improvements are worth a great deal against a gain, and they are worth nothing at all if you cannot evidence them. People who have renovated steadily over decades often have a far larger base cost than they realise and no paperwork to prove any of it.

One complication to flag rather than resolve here: property held since before October 2001 has its own valuation-date rules for establishing base cost, with more than one permitted method. That is a specialist question and worth advice rather than a guess.

The other exclusions worth knowing

Two further figures sit alongside the primary residence rules, both from the same SARS rates page.

In the year of death, the annual exclusion for individuals rises from R50,000 to R440,000.

Small business relief allows an exclusion of R2.7 million in capital gains for individuals aged 55 and older disposing of a small business, where the market value of the business does not exceed R15 million.

Neither replaces the primary residence exclusion, but where a sale involves a business run from a property, or an estate, both are worth raising with an adviser.

What to do

1. Work out the gain, not the price. Selling price less base cost. The exclusions apply to the gain, apart from the proceeds concession.
2. Check the proceeds figure first. At R2 million or less, the gain is disregarded and the base cost question falls away.
3. Reconstruct the base cost properly if the gain matters — purchase price, transfer costs, agent's commission, and capital improvements as distinct from repairs. Keep the invoices; this is where money is won or lost.
4. Check the two hectares if the property is large.
5. Check any letting history against the five-year rule and the occupation requirement either side of the absence.
6. Check any trade use, including a home office you have claimed for.
7. Use the current figures. The R3 million exclusion applies for the 2026 and 2027 years of assessment. If a source quotes R2 million as the gain exclusion, it is describing an earlier position.

If you are working through the costs of a move, our transfer duty calculator covers what a buyer pays and our bond calculator the financing side. For the estate dimension, estate duty and inheritance tax explains what heirs receive.

For everything else, start at our money guides.

Frequently asked questions

How much of the gain on my home is exempt from capital gains tax? R3 000 000 of the capital gain or loss on disposal of a primary residence is disregarded, for the 2026 and 2027 years of assessment.

I have seen R2 million quoted. Which is right? R3 million is the current gain exclusion on the SARS capital gains rates page updated in February 2026. R2 million was the earlier figure and still appears on older guidance pages. R2 million does remain correct for the separate proceeds concession.

What is the proceeds concession? You may disregard the capital gain on disposal of your primary residence where the proceeds do not exceed R2 million — which also means you do not need to establish the base cost.

Does the exclusion apply to the selling price? No, apart from the proceeds concession. The R3 million applies to the capital gain or loss, not to what the property sold for.

Can a caravan or boat be a primary residence? Yes. SARS describes a residence as a structure used as a place of residence, expressly including a boat, caravan or mobile home, provided the other conditions are met.

What if I let the house out for a while? It is still treated as used for domestic purposes during a continuous absence if let for not more than five years, provided you occupied it continuously for at least a year before and a year after the absence.

What if I run a business from home? The exclusion does not apply to the part used for carrying on a trade, so that portion is not sheltered.

How much land is covered? Up to two hectares used for domestic or private purposes together with the residence.

What tax rate applies to the taxable part? For individuals and special trusts the maximum effective rate is 18%. Companies are at 21.6% and other trusts at 36%. These are effective rates, not inclusion rates.