COVID-19: HOME OFFICES AND TAX DEDUCTIONS

Its official: Stay out of the office until end of September and SARS will allow you to claim home office expenses!

With the “new” normal quickly becoming just normal, working temporarily or permanently from home is starting to become a reality. If you have made the transition, you may be wondering if you are able to claim any home-office expenditure as well as how to.

It is worth understanding the tax rules around home office expenses as SARS may allow these deductions of home office costs within the “Other Deductions” section of the ITR12. It is important to realize though, that this deduction is only allowed under certain specific conditions.

With that said, it’s also important to understand that this situation is different for sole proprietors or freelancers who work from home – these taxpayers can automatically deduct all their home office expenses. They can just simply reflect the relevant portion of home office expenses within the “Local Business, Trade and Professional Income” section of their ITR12.

In this post we will be specifically discussing home office deductions in respect of employees.

Am I eligible to claim:

The Income Tax Act does provide specific cases for an employee to claim tax deductions related to home office expenses:

• If you are earning a salary but you are using your home office regularly and exclusively to perform work for your employer.

• If you are spending more than 50% of your total working hours working from your home office – it needs to be a dedicated workspace and not just your dining room table.

For this tax year, ending 28 February 2021, with the lockdown and requirements to only work limited days in a week, many salaried employees could spend more than 50% of their total working hours in their home offices. Working at home from the start of lockdown until end September would give you grounds to claim.  

Which home office expenses are typically claimable?

Stationary, Telephone bills, Rent, Cleaning expenses, Wear and tear on assets, Internet expenses and Repairs in relation to business usage.

NB! Rates and Interest on bond may also be claimed however you’ll need to divide your home office size by your total residence to calculate what percentage of these expenses can be claimed.  

If you are claiming part of your primary residence as an office, you’ll receive less of a capital gains tax break when you sell your property. This will potentially offset the amount you save in taxes from claiming home office deductions now.

How can I claim?

Claiming home office expenses is done in your ITR12 (Personal Income) tax return form. You’ll need to retain the proof of your expenses – think invoices and statements – and you’ll need to record the days which you’ve worked from home to prove that it was more than 50% of your total hours worked. Save any communication with your employer regarding the days required to work from home to assist in proving this.

Any alternatives?

Another approach would be to claim home office expenses from your employer on a reimbursement basis. Essentially, you’ll incur the costs and then be reimbursed by your employer for these costs. You should retain all invoices and statements of expenses incurred for business usage as supporting evidence to employer.

This article is intended to make South Africans aware that there may be a tax benefit associated with working from home and which may come in handy in light of the economic downturn.  It is highly recommended that you either enlist the expertise of a tax professional to assist you in determining whether you qualify for a deduction of home office expenses or, at the very least, that you consult SARS’ Interpretation Note 13 and 28 which discusses this topic in detail.

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