If you work from home, you may be able to lower your tax liability by deducting home office expenses.
The expenses deemed deductible by the South African Revenue Service (SARS) are determined by how you’re remunerated.
Which home office expenses are deductible?
SARS lists deductible home office expenses as two defined categories.
1. Actual costs of running and maintaining the premises, which include:
- rent on the premises
- interest on the bond
- repairs to the premises
- rates and taxes
- cleaning costs
- wear and tear.
2. General office costs, such as:
- office equipment
Who is eligible for home office tax deductions?
There are three categories of taxpayers who are entitled to home office tax deductions. They are:
- salaried employees
- commission earners
- sole proprietors and freelancers.
1. Salaried employees
Salaried employees are defined as permanently employed individuals who earn more than 50% of their income from a fixed monthly salary.
To qualify for home office deductions as a salaried employee, you must spend at least half of your total working hours operating from home.
In this scenario, deductible office expenses are limited to the costs of running and maintaining the actual premises, and not general office expenses, such as phones, equipment and stationery.
2. Commission earners
If the bulk of your income is commission and you predominantly work from your home office, you can deduct the full quotient of home office expenses.
This includes expenses relating to the premises and the general running of an office.
3. Sole proprietors and freelancers
If you’re a sole proprietor or freelancer, you can automatically deduct all home office expenses itemised in both categories outlined above.
You aren’t required to meet any specific conditions beyond entering the pro-rata portion of the costs of running and maintaining an office on your tax return.
What general requirements must be met to qualify for home office tax deductions?
To qualify for tax deductions on home office expenses, the office must be:
- a designated space in the home that is exclusively used to conduct a business or trade
- properly equipped for that particular business or trade.
In the case of commission earners and salaried employees, written permission to work at home must be granted by the employer.
What supporting documents are required?
SARS will usually request documentary evidence to support your claim.
Besides a letter from your employer stating that you’re permitted to work from home, you must be prepared to provide scanned copies of invoices.
You may also be expected to submit the calculations used to determine the claimable portion of tax-deductible home office expenses.
Store the clutter and set up a home office
Do you want to set up a home office but don’t have the space? How about clearing out the attic or converting the garage into an office?