Tax deduction for Home Office Expenses

Working from home during the Pandemic? You might be able to claim back some of your home offices expenses through SARS

As South Africans prepare to submit their 2021 tax return this tax season, it’s worth checking if you qualify to claim for a home office expense deduction, which could mean reimbursement of some of the hard costs associated with working from home over the annual period.

The past year or so has been unique in that many South Africans have been forced to work from home due to the COVID-19 pandemic. Due to national Lockdown restrictions, office premises were limited with regards to capacity (from 30-70% in some sectors), had to implement strict screening and hygiene processes, and faced potential liability for staff who might have become sick at their premises. In addition, President Ramaphosa publicly urged businesses to allow their employees to work from home (WFH) as far as possible to curb the spread of the virus.

In doing so, taxpayers have naturally incurred additional home costs, including increased use of electricity, ensuring appropriate Wi-Fi connectivity, and, in some cases, setting up workstations in their homes with all the required technology and stationery in order to adequately perform their duties. While some companies may have provided financial reimbursement for this, in many cases these costs were incurred by the individual.

In response to this, The South African Revenue Service (SARS) has fortunately allowed some provision that allows taxpayers to claim a deduction in respect of certain expenditure related to WFH in the latest tax year. However, confusion seems to reign supreme as to who qualifies for this and how to go about claiming it.

 

How to know if you qualify

To qualify, you need to have a formal home office, used exclusively for working, at your primary residence – in other words, the home in which you live permanently. So, if you work from your kitchen table, bedroom or lounge, it does not count and you do not qualify. This home office needs to be a completely separate space set up for the purposes of working only.

In addition, you’ll need to have worked from this home office for more than 50% of your work duties over the past annual tax period. To prove this, you will need to produce a letter verifying that the space was used for work purposes, and you have to work from home for more than 50% of that time period. This does not include those who spend most of their time on the road visiting clients.  

It is also important to understand what exactly you are allowed to claim for. Rent of the premises, interest on a bond, rates and taxes, cleaning, water and electricity, and internet are examples of expenditures that qualify for home office deductions in this instance. Basically, any costs that contributed to an amicable work environment during that time period. On the other hand, expenses of a capital nature are not allowed.

However, you cannot claim for the full total of costs of the above-mentioned list, because you also used these expenses in your home for something other than work, which makes them partly living expenses. In order to make your claim, you’ll first need to calculate your WFH expenses.

You will need to submit this, together with all the relevant supporting documents substantiating your claims, through e-filing or at SARS office during your tax return.

Other important things to note before claiming for WFH expenses:

  • Impact on Capital Gains: If you own the property where the home office is, defining part of this primary residence as a home office could have an adverse impact on a future capital gains determination.
  • Expect to be Audited: All claims for home office expenses may be subject to further verification or audit by SARS (especially if you’re claiming for the first time).

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