The world has changed in the last year and working from home is still a reality. Many companies have restructured the way they work so that employees can work remotely. While you might look forward to jumping into PJ’s every day and enjoy the comforts of home life, it also means that you probably have extra expenses that would have normally been covered by your employer.
Thankfully, SARS may let you deduct some of these expenses, meaning that your overall tax bill is reduced.
Do I qualify to deduct home office expenses?
Certain taxpayers including commission earners or full-time employees working from home may be able to claim home office expenses. To qualify for home office expense deductions as an employee, you need to meet certain criteria including:
- You must have been given permission from your employer to work from home.
- You must spend more than half your working hours, working from your home office.
- Your home office must be used exclusively for work purposes.
- The office must be specifically equipped with everything you need for the work you do.
The position is slightly different for independent contractors/self-employed taxpayers as they can automatically deduct all their home office expenses and do not need to work through the same stringent set of conditions applied to employees to see whether they qualify for a deduction.
What is a home office expense?
SARS has a list of expenses that may be deductible depending on whether or not you earn more than 50% of your total remuneration as commission income. These include:
- pro rata rental (if you rent your property)
- pro rata rates and taxes
- pro rata interest on the property bond
- cost of repairs to your home office
- cost of stationery
- office equipment
- cost of business calls and data used for business purposes on your private phone
- cleaning expenses for your home office
- wear-and-tear on assets used for your home office
It is important to note that you cannot claim the entirety of your bond, rental, rates and taxes. You need to calculate a portion of these towards your home office based on the % of floor space that your office uses in relation to the size of your home. For example, if your home office is 10 square meters and your home 100 square metres, your home office accounts for 10% of the total floor space of your home. You can then deduct 10% of the cost of your bond or rental and 10% of your rates and taxes as a home office expense.
Are reimbursed expenses taxable?
Costs that have been reimbursed by your employer are non-taxable as long as they are incurred on your employer’s instruction, are relevant to your trade and that you can prove the expenses were exclusively for work purposes.
How does this affect capital gains tax?
While claiming home office expenses to reduce your taxable income might seem attractive, you need to be aware of the impact it will have on your CGT if you ever sell your property. When you sell your primary residence, the first R2 million of the capital gain or loss is excluded when calculating capital gains tax.
However, if you claimed part of your primary residence as a home office, the capital gain has to be apportioned between home and business use. This is done based on the size of the home office compared to the property size and based on how long the office was used for during ownership of the property.