The COVID-19 pandemic lockdown has led to many South Africans working from home. Using a home office often means that you have extra expenses every month. The good news is that the South African Revenue Service (SARS) will let you claim tax back on these costs. Below we discuss what expenses qualify and how you can claim.
Who can claim?
If you are an independent contractor, someone who earns commission or a full-time employee working from home, you are eligible to potentially claim tax back on your home-office expenses.
You will need to prove that your workspace at home satisfies the following requirements to be considered a “home office”:
- The space is a dedicated work area that is only used for work purposes on a regular basis
- You have equipped this space specifically for work-related duties
- You have worked from this space for at least six months of the tax year
- Your work-related tasks are primarily carried out from this space
For example, if you are an employee who has been working your regular office hours for a sole employer for the tax year 1 March 2020 to 28 February 2021, you will qualify if you are working from your home office for at least half of the tax year.
What expenses can you claim?
SARS has compiled a list of claimable expenses. Anything off this list will not qualify, even if you consider them to be home-office related.
You can claim the following expenses:
- Stationery and data costs
- Wear and tear on office equipment
- A portion of the interest on your bond or rental of your home
- Municipal rates and taxes, including water and electricity
To calculate expenses relative to your bond, rental, rates and taxes, the total floorspace of your home office will be compared to that of your entire home. For example, if your home office is 15 square meters and your home 150 square metres, your home office accounts for 10% of the total floorspace of your home. You will therefore be allowed to deduct 10% of the relevant expenses such as rates and taxes or interest payable on your bond.
Where does CGT come in?
Capital gains tax (CGT) forms part of your income tax and is calculated on the positive difference between the sale price of the asset and its original purchase price. A capital gain only applies when you sell an asset for a higher price than it was bought it for.
Keep in mind that, while claiming the home office deduction will reduce your taxable income and ultimate tax liability, if you own your home, it will have a negative impact on the calculation of CGT if and when you decide to sell.
For primary residences, the first R2 million of any capital gain on selling isn’t taxed. However, if SARS is aware that that a portion of your home is an income-generating office, that part won’t be considered a residence and will be excluded from your capital gains tax break.
For example, if you claim your home office is 10% of the total floorspace of your home, then 10% of the final selling price may be liable for CGT at a rate of 40%. The actual CGT calculation will also factor in the period of time over which you used that part of your home as your office.
What if your employer reimburses your home office costs?
If your employer reimburses your home-working related costs, such costs won’t be taxable provided they meet the following requirements:
- The relevant expenses have been incurred at the employer’s instruction
- The relevant expenses have been incurred for the employer’s trade
- You can prove to your employer that the relevant expenses were used solely and essentially for work purposes
The following are examples of commonly reimbursed expenses that are not taxable:
- Data bundles purchased specifically to work from home
- Stationery bought to perform necessary work tasks
If you’re looking to claim tax back from SARS, we can help. Get in touch with our team of experts by filling out our contact form, sending us an email on email@example.com or calling us on +27 (0) 21 657 2120.
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